A shortage of copper concentrate this year has prompted several smelters in China to reduce their output, with further reductions expected next year as the supply of raw materials is projected to tighten even more, according to industry analysts and participants.
Refined copper production in China, the world’s largest producer, is closely monitored by investors who anticipate long-term supply constraints driven by the rising demand for energy transition technologies. The recent closure of First Quantum’s Panama Cobre mine and reductions in output from other sources have intensified the raw material shortage for smelters. CRU, a research and consultancy firm, forecasts a global copper-in-concentrate shortage of 1.1 million metric tons by 2025. This deficit could result in the closure of 300,000 tons of smelting capacity, a reduction in smelter demand by 640,000 tons due to lower utilization rates, and delays in around 150,000 tons of smelter projects.
Large smelters, which typically rely on annual contract purchases, are less impacted by the concentrate shortage because they have secured treatment and refining charges (TC/RCs) agreements at $80 per ton and 8 cents per pound for this year’s supply. However, smaller producers are facing increased pressure to cut production due to declining spot TCs and a tighter concentrate supply. In the first half of this year, several small and medium smelters in China reduced their output. Among the larger players, Jinchuan cut output at two plants by 10% and 20% for one month each, and Baiyin reduced output at one of its smelters by 20-30% in March, according to a June report by CRU.
Baiyin and Jinchuan did not immediately respond to requests for comment.
“As supply shortages worsen, more smelters will likely take measures to cut production,” said an official at a mid-sized smelter, who requested anonymity.
The drop in spot TCs and the anticipated decline in benchmark prices for next year have led some smelters to plan for output reductions in 2025. Most smelters typically finalize their production plans for the upcoming year in September and October.
“With the 2025 TC/RC annual benchmark expected to be economically unviable for many smelters, they are likely to operate at lower utilization rates,” noted CRU analyst Craig Lang. Baotou Huading Copper Industry Development Co has indicated that it might cut its output by 40% next year, according to sources familiar with the matter. The company, which has an annual capacity of 30,000 tons of refined copper and 200,000 tons of blister, declined to comment.
Daye Nonferrous Metals Group Holdings Co, which has an annual capacity of 930,000 tons, also plans to reduce its smelting output by 20% next year, Bloomberg reported. A Daye investor relations official denied the report of an output cut at the meeting, without commenting on current production conditions or its plans for 2025.
Despite the concentrate shortage, China’s refined copper output increased by 7% in the first half of this year, reaching 6.67 million tons, according to official data.
