Bloomberg：铜陵、大冶等中国铜冶炼厂计划进一步减产并延续至2027年，LME年会前夕博弈明年加工费

Chinese copper smelters have started curbing output and told international concentrate suppliers that they plan further cuts this year and into 2027 as higher ore costs and falling byproduct prices threaten heavy losses, according to people familiar with the matter.

Firms including Tongling Nonferrous Metals Group Co. and Daye Nonferrous Metals Group Holdings Co. plan to process less concentrate, said the people, who asked not to be identified as they’re not authorized to speak publicly. Some plants have begun maintenance and are running at minimal rates, with feedstock resold to the market, they said. Up to 30% of Tongling’s primary smelting capacity will be affected, two of the people said.

The cuts would further crimp Chinese refined copper production at a time when metal prices are near a record high. Mine supply has struggled to keep pace with an expansion in smelting capacity, driving treatment and refining charges — a key source of smelters’ income — lower as processors compete more for inputs. Executives at several major smelters have privately said at industry events lately that output will fall further in the fourth quarter, the people said.

The plans have dominated talks among miners, traders and buyers gathered in London this week for the London Metal Exchange’s annual conference, where the industry is preparing for negotiations on next year’s concentrate trade and fees to process it. The smelter cuts in China, the top producer or refined copper, are already under way, but the full scale and duration is unclear.

A representative of Tongling declined to comment. Calls to Daye seeking comment went unanswered.

China processes about half of the world’s copper, and most smelters are state-owned and important to local economies and employment. Tongling is a leading member of the China Smelters Purchase Team, which represents major smelters in concentrate purchases. A key copper smelter in South Korea this week said it’s considering cutting output as a global shortage of concentrate squeezes margins.

Some concentrate sellers are skeptical that all the proposed Chinese cuts will materialize, according to people familiar with the matter. Curbing concentrate purchases, temporarily idling plants and threatening to reduce output are common negotiating tactics used in the industry, the people said.

Many Chinese smelters have had a strong year before now, amid higher prices of byproducts that smelters sell. That helped boost profit for firms such as Jiangxi Copper Co., Tongling and Yunnan Copper Co. But sulfuric acid and other byproduct prices have since retreated, leaving smelters more exposed to high concentrate costs and low processing fees.

Falling Output

Chinese production has already dropped. Third-quarter refined copper output fell 1.1% from the previous three months, according to the National Bureau of Statistics. Production retreated from a record high in June amid lower sulfuric acid prices. A domestic invoicing crackdown has also disrupted copper scrap sales and limited access to the alternative feedstock.

“There is a market consensus that smelters will have to extend cuts in the coming months,” said Wanqiu Xu, an analyst at Cofco Futures Co.

Industry researcher Mysteel Global estimates that maintenance and production cuts will reduce fourth-quarter refined copper output by 293,000 tons from its previous forecast, based on a survey of Chinese smelters. Full-year output is expected to rise just 1% to 13.7 million tons, largely due to curbed production in the second half, the researcher said. That compares with almost 15% last year.

Any cuts threaten to further squeeze supplies in China, which has seen copper flow to the US in anticipation of import tariffs. The Yangshan premium, a gauge of demand for imported copper into China, has hit the highest in data going back to 2017 after domestic inventories dwindled.

Read More: China’s Copper Premium Soars as Buyers Scramble for Supply

“Supply is simply too tight,” said Wang Wei, general manager of Shanghai Wooray Metals Group Co. “Consumers tend to buy a little less when prices rise and replenish inventories when prices fall. Both raw material inventories and finished goods inventories at copper fabricators have already been drawn down to minimum levels.”