Chinese Copper Smelters Get Short-Term Relief, but Production Boost Unlikely

Chinese copper smelters are experiencing short-term relief in higher fees due to increased Indonesian supplies and a surge in discounted ore. This has improved profitability, but may not be enough to boost production as there is still too much capacity and insufficient concentrate. Treatment charges account for one-third of a smelter's income, and margins are also boosted by the price of sulfuric acid.

Chinese copper smelters are experiencing a brief respite in higher fees, driven by increased Indonesian supplies and a surge in discounted ore. This short-term relief has improved profitability, although it may not be enough to entice smelters into boosting production.

Spot treatment charges, which account for about one-third of a smelter's income, have ticked higher over the past six weeks. This increase is largely due to a surge in discounted Indonesian supplies, which has freed up more cargoes for delivery to China. Freeport-McMoRan Inc. is selling unexpectedly large volumes of ore following an outage at its Indonesian smelter, helping to loosen supply and make processing in China more profitable [1].

Additionally, the price of sulfuric acid, a smelting byproduct sold to the chemicals industry, has risen to a three-year high, further boosting smelter margins. Li Chengbin, an analyst with Mysteel Global, suggests that smelters could now be turning a small profit [1].

However, China’s monthly output of refined copper has set a succession of records this year, topping 1.3 million tons for the first time in June. This level is viewed as unsustainable given the margin pressures faced by smelters and the government’s campaign against overcapacity across industries [1].

The increased availability of Freeport’s ore comes with a time limit. The problem remains that Chinese smelters still aren’t making enough money to plan on boosting production, Li said. Ultimately, there is still too much capacity and insufficient concentrate to go around, and seasonal maintenance schedules should still reduce output in September and October [1].

Moreover, a new major copper smelter in India owned by Adani Enterprises Ltd has applied to become a listed copper-producing brand with the London Metal Exchange (LME). The smelter, located in Gujarat, has an annual production capacity of 500,000 metric tons and is expected to begin smelting in May [2]. This new facility is coming online at a time of shrinking smelting margins due to new smelter capacity in China and slower-than-expected growth of copper concentrate supply. It is expected to reduce India's reliance on imported copper.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-14/chinese-copper-smelters-get-only-short-term-relief-on-margins
[2] https://www.business-standard.com/companies/news/adani-group-s-new-copper-smelter-applies-to-become-lme-listed-brand-125081301933_1.html