Chinese Copper Smelters: Margin Collapse and Plant Shutdowns

Ladies and gentlemen, buckle up! We're diving headfirst into the red-hot world of copper smelting, where Chinese smelters are grappling with a margin collapse that's forcing them to switch off plants left and right. This is a market under intense strain, and you need to know what's happening NOW!

First things first: the copper concentrate market is TIGHT! We're talking about a global copper concentrate market that's expected to remain tight in 2025, as an expected rise in copper smelting production capacity is set to outpace new copper mining projects and expansions. Argus expects 2.8mn t/yr of copper smelting capacity to come on stream next year, with 1.25mn t/yr of this coming from China and 1.55mn t/yr from the rest of the world. That's a lot of smelting capacity, folks!

But here's the kicker: the supply of copper concentrate just isn't keeping up. Major Chinese copper producer Tongling Nonferrous plans to launch two copper smelters in the second half of 2025, with a combined production capacity of 800,000 t/yr. But guess what? The firm's 500,000 t/yr Tongling Jinxin smelter is expected to start up in the middle of 2025, pushed back from an initial launch date of the end of this year because of tight supply of copper concentrate feedstock. And the firm's 300,000 t/yr Tongling Jintong smelter is projected to start operations in October, with 200,000 t/yr of refined copper and 100,000 t/yr of copper anode production. But the company has not confirmed if it has secured enough copper concentrate to support either project. That's a recipe for disaster, folks!

And it's not just Tongling Nonferrous. The Onsan copper smelter in South Korea is likely to cut its output by 100,000t to 550,000t for 2025, because of concentrate supply tightness. Some Chinese smelters have already cut production capacity in response to tight copper concentrate supply or because of accidents at their facilities. "Liaoning Shenghai Copper, Guangxi Nanguo Copper, Baiyin Nonferrous, Chifeng Fubang Copper and Daye Yangxin Hongsheng have suspended operations, removing a combined 1mn t/yr of production capacity," a trader said. That's a lot of capacity being taken offline, folks!

But wait, there's more! The benchmark talks between Chinese smelters and representatives from Chile-based mining firm Antofagasta for copper concentrate supplies in 2025 were subject to long delays. Major Chinese smelter Jiangxi Copper and Antofagasta finally settled their treatment and refining charges for copper concentrate supplies for 2025 on 5 December, at $21.25/t and 2.125¢/Ib respectively, down from $80/t and 8.0¢/Ib in 2024, according to market participants. That's a significant drop in TC/RCs, folks, and it's putting even more pressure on Chinese smelters.

So, what are Chinese copper smelters doing to adapt? They're increasing the use of secondary copper materials, expanding blending capacity, pushing for higher recovery rates, and securing long-term contracts with international miners. But is it enough? Only time will tell, folks!

The bottom line is this: the copper market is under intense strain, and Chinese smelters are feeling the heat. They're switching off plants left and right, and it's a situation that's not going to change anytime soon. So, if you're invested in copper, you need to be paying attention to what's happening in China. This is a market that's on fire, folks, and you don't want to get burned!