By Amy Lv and Lewis Jackson
BEIJING (Reuters) – Main copper smelters throughout prime client China have kicked off gear upkeep in March, historically a peak demand interval, in a bid to stem losses from a worsening feedstock scarcity that’s hammering margins, business insiders stated.
Shutting down vegetation in what’s historically one of many busiest instances of the 12 months highlights how a lot ache the shortage of copper focus is inflicting refiners, an issue compounded by smelting overcapacity that has sparked fierce competitors for the uncooked materials and despatched remedy charges under zero.
Roughly 980,000 metric tons of smelting capability, or 8% of China’s complete final 12 months, is about for upkeep in March, Hongyuan Futures stated in a observe. Three analysts and a smelter supervisor informed Reuters this was an unusually excessive quantity in comparison with earlier years.
Workers at three massive smelters confirmed to Reuters they started gear upkeep in March. One other operator, Tongling Nonferrous Metals Group, which accounted for 13.5% of China’s refined copper output in 2023, began month-long upkeep on some smelting gear in early March, in accordance with two sources.
Manufacturing cuts could be delicate in China, the place many smelters are essential contributors to regional economies, however as in lots of industries, from metal to grease refining, the sector is tormented by overcapacity as operators chase market share.
The overcapacity in China, the world’s largest provider of the refined metallic utilized in wiring, equipment and new vitality applied sciences, is contributing to a world imbalance within the copper smelting business.
By shutting gear for upkeep, smelters hope to chop consumption of copper focus, ease the focus shortfall and cease processing charges from sliding even additional, analysts stated.
Eight analysts and smelters who spoke to did so on situation of anonymity given they aren’t authorised to talk to media.
Tongling didn’t reply to Reuters’ request for remark.
The business’s difficulties put a highlight on the March 31 quarterly assembly of the China Smelters Buy Workforce (CSPT), the place measures together with manufacturing cuts are set to be mentioned, sources with data of the matter stated.
“There’s a important danger of large-scale output cuts amongst Chinese language smelters this 12 months,” stated Patricia Barreto, senior analyst at S&P International Commodity Insights.
If Chinese language smelters collectively agree a manufacturing minimize, refined copper output this 12 months will doubtless fall, which may lead China to import extra, analysts stated.