Outlook for Copper Smelting Capacity and Effects from China’s Supply-Side Reform, SMM Reports

SHANGHAI, Mar. 28 (SMM) - Expansion of copper smelting capacity will slow, said Zhang Zhizhao, Senior Analyst from Tongling Nonferrous Metals Group Holding Co. Shanghai Branch at the SMM 2017 Copper & Aluminum Summit.

Overseas Copper Smelting Projects Decrease

In recent years, copper refining projects overseas were mostly in 2016. Refining capacity expected to come online was 450,000 tonnes, but actually the capacity put into production was even lower. Growth of new smelting capacity slowed significantly to less than 60,000 tonnes in 2017. And there will be only 4 new projects in 2018, with small capacity, said Zhang.

New projects are mainly smelting & refining projects. In a long-term point of view, Chile’s copper refining capacity will be large, and 200,000 tonnes of capacities will be added in 2024. But, this project is of great uncertainty since the country’s copper industry aims to axe capital spending, he added.

Collections of Stories in Base Metal Market at SMM 2017 Copper&Aluminum Summit

Peak Period of Expansion Ends in China

Expansion in China’s copper smelting capacity began in 2009. New capacities peaked around 2013 after commissioning of new capacities added in 2010. Newly increased copper smelting and refining capacities averaged 600,000 tpy and 1.10 million tpy during 2011-2013, and slowed from 2014.

New capacities will be 300,000 tonnes in 2017, Zhang reckons. New capacities will hold stable this year, and lower than 2018. New capacities will hit a high in 2019 with commissioning of projects by Chalco and Qiqihar City, Heilongjiang Province.

China’s Supply-Side Reform Shows Result

Commodity prices witnessed amazing growth in 2016. Demand improved due to the property market and infrastructure construction. Besides, supply-side in China is also a boost. Capacity elimination, destocking and deleverage at upstream industries pushed up commodities and helped improve profit at enterprises last week. At the same time, well-behaved property, infrastructure construction, home appliance and automobile industries turned national economic conditions around. Value-added at industrials, PPI and GDP all topped expectations last year.

Effects from Supply-Side Reform on Copper Smelting

Of the nonferrous metals industry, aluminum bears the brunt of China’s supply-side reform. Lead output was also significantly affected on the environmental protection respect. But copper smelting was limitedly affected by supply-side reform because of advanced smelting and recycling technique. Meanwhile, China’s copper imports were high due to scarce copper resources at home.

On output cut front, Chinese smelters had slashed production against the sluggish commodity market in 2015. But new capacities kept coming online. In this scenario, the National Development & Reform Commission (NDRC) constrains copper capacity expansion in the 13^th Five-Year Plan. So, China’s copper smelting capacity will unlikely expand remarkably after 2019. The copper industry will peak around 2020 or new few years, Zhang expects.

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