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bogfiton Mar 30, 2021 9:07am
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China smelters are unlikely to cut production significantly
China smelters are unlikely to cut production significantlySingapore — Margins for China's copper smelters are under intense pressure as treatment charges reach a 10-year low and cathode demand remains weak, prompting several smelters to bring forward maintenance plans or reduce raw material usage to minimize spot buying, market sources said March 29.
Shipment delays for Chilean cargoes in January, and December, a slowdown in the startup of new mining projects due to the global pandemic and increasing impurities in the output from Chile's major Collahuashi mine have all contributed to tight spot supply, market sources said.
Some Chinese smelters have also reduced term contract volumes for 2021 after buyers faced difficulty reaching agreement with sellers during negotiations last December. Both traders and smelters were now buying in the spot market, which has pressured down spot TCs significantly, market sources said.
End-users were either buying scrap copper as substitute or replying on existing inventory to delay procurement, and copper cathode premiums have fallen to negative in China's domestic market since mid-February.
Treatment charges, copper cathode premiums, sulfuric acid prices and copper prices are the key elements in determining a copper smelter's profit margin.
"I believe most smelters in China are not making a profit in the current market," a trader said.
Although Chinese smelters are unlikely to cut production significantly, some have already implemented strategies to trim output by using less copper concentrate or more lower-grade materials, or advancing maintenance schedules, market sources said.”
https://www.spglobal.com/platts/en/market-insights/latest-news/metals/033021-chinas-copper-concentrate-tcs-touch-10-year-low-squeezing-smelter-margins
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