CRU, a analysis and consultancy agency, predicts a scarcity of focus feed globally in 2025 at 1.1 million metric tons of copper-in-concentrate. It will possible result in 300,000 tons of capability closures, a 640,000-ton discount in demand from smelters decreasing their utilization charges and round 150,000 tons of smelter challenge delays.
Whereas giant smelters reliant on yearly contract purchases are much less affected by the focus scarcity given they signed remedy and refining fees (TC/RCs) agreements at $80 per ton and eight cents per pound for this yr’s provide, smaller producers are underneath strain to chop manufacturing as spot TCs fall together with focus provide.
Within the first half of this yr, a number of small and medium smelters in China trimmed manufacturing, whereas amongst bigger gamers Jinchuan lower output at two crops for one month every by 10% and 20% and Baiyin lower output at a smelter by 20-30% in March, CRU mentioned in a June report.
Baiyin and Jinchuan didn’t instantly reply to requests for remark.
“As the availability shortages worsen, there will likely be extra smelters taking motion to chop output,” an official at a mid-sized smelter mentioned, declining to be recognized.
Falling spot TCs and expectations of sharply decrease benchmark costs subsequent yr prompted some smelters to plan output cuts for 2025, in line with analysts and market members.
Most smelters solely make their manufacturing plans for the following yr in September and October, one producer mentioned.
“With 2025’s TC/RC annual benchmark anticipated to be at a degree which is uneconomic for many smelters, they’re more likely to be much less incentivized to function at excessive utilization charges,” mentioned CRU analyst Craig Lang.
Baotou Huading Copper Business Growth Co mentioned at a gathering of high smelters final week that it might lower output by 40% subsequent yr, two individuals conversant in the matter mentioned. The corporate, which declined to remark, has annual capability of 30,000 tons refined copper and 200,000 tons of blister.
Daye Nonferrous Metals Group Holdings Co, with annual capability of 930,000 tons, plans to trim smelting output by 20% subsequent yr, Bloomberg reported on Wednesday.
A Daye investor relations official denied that it talked about an output lower on the assembly, with out commenting on present manufacturing circumstances or its 2025 plan.
Nonetheless, massive output cuts are unlikely, as giant smelters in China are primarily state-owned and have a duty to keep up manufacturing and maintain financial development, analysts and business gamers mentioned.
“Firms all have income targets to succeed in and it’s not easy and straightforward to decrease manufacturing for all of subsequent yr. Everybody will come again on-line if TCs return to 50,” an official at a big state smelter mentioned, declining to be named.
Regardless of the focus tightness, China’s refined copper output rose 7% within the first half of this yr to six.67 million tons, official information confirmed.
(By Siyi Liu, Mai Nguyen, Julian Luk and Beijing newsroom; Modifying by Tony Munroe and Emelia Sithole-Matarise)