China smelters plan output cuts, no Q2 copper guidance price, sources say

28th March 2024

By: Reuters


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BEIJING - China's top copper smelters have proposed a production cut of 5% to 10% and decided not to issue guidance prices for copper processing charges for the second quarter, two sources with knowledge of the matter said on Thursday.

The announcements, made at a meeting of the China Smelters Purchase Team (CSPT) in the commercial hub of Shanghai, come after the world’s top producer of refined copper grappled with short supply and a sharp drop in TCs in the spot market.

Top smelters agreed the spot market had become disconnected from true market fundamentals, one meeting participant told Reuters.

"It is meaningless to set a guidance price in the current market," the source added, speaking on condition of anonymity.

CSPT has declined to set guidance prices before, most recently in the second quarter of 2021.

Top smelters had also proposed output curbs in January but no specific actions were taken.

CSPT plans to expand by including three new members, the two sources said.

The group had previously set first-quarter guidance of $80 per ton and 8.0 cents per pound, as unexpected supply shortages hit the world's top refined copper producer with a heavy reliance on overseas raw material supplies.

Supply shortages have been driven by mine-side disruptions, chiefly the closure of the big Cobre Panama mine owned by First Quantum's.

TC/RCs, a key source of revenue for smelters, are paid by miners when they sell concentrate, or semi-processed ore, to be refined into metal.

The charges typically fall when the concentrate market tightens and smelters must accept lower terms to secure feedstock.

Spot copper TCs in China tumbled to $11.20 per ton on March 11, down 80% from the end of December and the lowest level since 2013, when pricing agency Fastmarkets started publishing the weekly index.

The rapidly falling TCs caused losses for smelters that rely largely on spot purchases, while the leading smelters get most of their concentrate through long-term contracts signed at the $80-a-ton annual benchmark.

Spot TCs are likely to recover from the historic low in the second quarter as smelters start maintenance. However, the shortage of supply is expected to last, given smelters' growing output this year.

China's refined copper production in January and February rose 10.7% from the corresponding months a year before to about 2.22 million tons, data from the National Bureau of Statistics showed.

In the first two months, China's imports of copper ore and concentrate rose by merely 0.6% on the year to 4.66-million tons, customs data showed.

Top smelters agreed at a meeting earlier this month to cut production at some loss-making plants, along with some other measures to cope with tight raw material supplies.

Despite the industry's efforts to control output, China's total refined copper output will increase by more than 3% this year, according to state-backed research house Antaike.

Edited by Reuters




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