TCs for copper concentrate continued to fall, the rising prices of sulphuric acid alleviated pressure on refinery profits

SHANGHAI, Feb 26 (SMM) – As of February 25, the SMM copper concentrate index (weekly) stood at $42.08/mt, $1.58/mt higher than a week earlier. Although the spot TC showed signs of stabilisation after the holiday and the willingness of refineries to restock rose with limited transaction after the holiday. The spot TC had experienced rapid decline for two consecutive months. The SMM copper concentrate index (weekly) stood at $40.5/mt as of February 10, some transactions below $40/mt also occurred before the holiday, which greatly reduced the profit margin of copper smelting production.

However, in terms of the sulphuric acid, the increase in sulphuric acid prices have made up for part of the refinery's losses. According to SMM calculations, every tonne of copper produced will correspond to 3.5 tonnes of sulphuric acid on average. Therefore, fluctuations in the prices of sulphuric acid also have a greater impact on the profits of copper smelters.

Domestic sulphuric acid prices continued to rise in February, with the most significant rises in East China and Central China. On the supply side, as the operating rates of overseas refineries were still limited, and the output of sulphur as a by-product is low, the prices of imported sulphur had obvious support for the cost of sulphuric acid. On the other hand, the output of domestic smelting enterprises also declined compared with the end of last year, so the output of smelting acid also declined. The demand side began to be released after the holiday, and the fertilizer and other industries ushered in the spring market.

From a regional perspective, the ex-factory price in southern China provinces such as Yunnan and Fujian remained above 350 yuan/mt. Sulphuric acid in Central China increased the most due to the maintenance schedule and consumption recovery of the refinery in January and February. Hubei is a distribution center for sulphuric acid consumption, whose factory prices moved above 400 yuan/mt. Acid prices in North China also rose slightly, but in addition to the digestion in Heilongjiang, Inner Mongolia, Jilin and other places were still oversupply, and the ex-factory prices were lower than 100 yuan/mt after taking into account that the freight subsidy was below 100 yuan/mt, which is still at a loss.

In addition, due to the rapid rise in copper prices, the release of domestic copper scrap stocks, the rapid expansion of refined copper and scrap copper price differences, and the sufficient supply of cold materials, domestic blister copper TCs rose to over 1,700 yuan/mt, and the CIF blister copper TCs stood at $160/mt, the prices of blister copper were also relatively favorable to refineries, making up for the gap caused by the shortage of some copper concentrates.

However, copper concentrate is still the most important raw material for smelting production, and mineral TCs are the most important factor affecting smelting profits. Therefore, when the copper concentrate TCs are currently at a very low level, SMM understands that a considerable number of refineries will arrange maintenance to adjust production pressure in April and May. Recently, there are rumors of production cuts by large domestic smelting groups, which reflect the loss pressure faced by the smelters under low TCs.