China’s copper smelters to cut concentrate purchases

China's 15 major copper smelters have agreed to cut their concentrate purchases by 8.8pc this year because of climate change mitigation strategies and depressed treatment and refining charges (TC/RCs), potentially switching to use more copper scrap and blister copper in their production of refined metal.

Overall, the 15 smelters will cut their copper concentrate purchases by 1.26mn t this year, equivalent to around 300,000t of refined metal. On an individual basis, each smelter is required to reduce their purchases by at least 5pc, according to market participants.

Most of the smelters involved are part of China's Copper Purchase Team (CSPT), with the addition of some privately run smelters, including Xiangguang and Guangxi Nanguo. The CSPT smelters comprise Tongling Nonferrous, Jiangxi Copper, Daye Nonferrous, China Gold, Baiyin Nonferrous, Gansu Jinchuan, Yunnan Copper, Zhongtiaoshan, Yantai Guorun, Zijin Mining, Fuye Heding, and Huludao Zinc's subsidiary copper smelter.

In terms of carbon emissions, copper smelting is one of the most polluting processes carried out by the non-ferrous metals industry, second only to aluminium production — hence its significance to China's goal of ensuring that its non-ferrous metals industry's carbon emissions peak by 2025 and are reduced to zero by 2060.

As they reduce copper concentrate consumption, smelters might instead use more copper scrap or blister copper as feedstock to produce refined copper metal with lower carbon emissions. Both are more widely available than concentrate thanks to a rebound in production activities after last year's Covid-19 turbulence, and current price levels enable Chinese smelters to achieve higher profit margins on the finished refined metal.

The move is also expected to lend support to copper concentrate TC/RCs — fees paid by mining firms to smelters to process concentrate into refined copper. While headline LME three-month copper prices are hitting fresh record highs this week in excess of $10,700/t, cif China copper concentrate TC/RCs are at record lows this year — a reflection of tight concentrate supply. TC/RCs stood at $31.20/t and 3.12¢/Ib on 7 May, according to Argus ' inaugural assessment — up from the high $20s in mid-April but down from the $53/t and 5.3¢/Ib purchase price floor that was agreed by 12 Chinese smelters for the first quarter of 2021.

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