[SMM interpretation] Copper concentrate TC repeated record low spot smelting loss of more than 1000 yuan smelter how to decompress?

Spot TC of imported copper concentrate has been declining since December 2018 and reached a new low of US $32.07 / ton on March 12, 2021.

Spot TC weekly index of imported copper concentrate (USD / ton)

With the continuous decline of copper concentrate TC, the spot smelting break-even index of copper concentrate in SMM smelter has been in a state of loss and gradually expanded since the second half of 2019, with a loss of 1223 yuan / ton in January 2021. The pressure on the smelter is also increasing.

SMM smelter copper concentrate spot smelting break-even index (yuan / ton)

Following the epidemic in Peru and Chile in January and February this year, waves, strikes and other unexpected events, the copper concentrate market once again burst out community road blocking, truck strikes and other incidents. On the week of March 9th, Glencore's Antapaccay copper mine in Peru was forced to stop operation and hinder the transportation of Las Bambas and Constancia due to a blockade by the local community. In addition, members of the Los Pelambres copper union of Chile's local Antofagasta rejected the labor contract offered by the mine for the next 36 months with a vote of 98.5%, in favor of a strike. In addition, trucking across Peru will go on strike indefinitely on March 15, local time, and the local truck National Union said it had not received any positive feedback after two years of negotiations with the local government. let them make the decision to strike. Due to the lack of freight trucks, the port is expected to have serious traffic jams, a large number of copper concentrates and electrolytic copper will be squeezed in the port. A series of events continued to dampen TC and market sentiment, making copper concentrate TC repeatedly hit new lows.

The processing fee, which is the main income of the smelter, has fallen again and again, and the loss has gradually expanded, which undoubtedly brings great pressure to the smelter, but the living condition of the smelter still needs to be observed from many angles:

1. Sulfuric acid, one of the by-products of the smelter, relieves some of the pressure.

Since the beginning of this year, the month-on-month increase has reached 25.51%, and there has been a boom in sulphuric acid resources in various regions. The price of sulfuric acid in southwest, east and central China has increased higher, and smelters have made more profits. The increase in the north is relatively small, while the profits of smelters are relatively limited. The gains from the sulphuric acid business of some smelters made up for the losses caused by the decline in TC and relieved some of the pressure.

two。 Most of the domestic smelters have their own mines.

There are 6 mines in production with 100% ownership, and the proportion of self-owned mines is relatively high. Less affected by the drop in TC of spot copper concentrate. At the same time, copper prices soared after the year, and its own mines were able to make a profit, which also partially alleviated the pressure caused by losses caused by the downward TC.

Based on the above two points, although TC continues to decline, the output of domestic smelters still keeps increasing, and the domestic output of electrolytic copper is still in the trend of year-on-year increase in recent months. According to SMM data, China's electrolytic copper production in February 2021 was 821800 tons, an increase of 2.89% month-on-month and 20.31% higher than the same period last year.

"Click to view the SMM copper industry chain database

According to the production schedule for March, although the smelter is currently under the pressure of declining TC, the supply of crude copper is still sufficient, and there is basically no maintenance plan in March. SMM expects domestic electrolytic copper production in March to be 854800 tons, up 4.01% from the previous month and 14.94% from the same period last year. (in the same period last year, refineries in Shandong were at a low level due to financial pressure, and sulfuric acid storage pressure caused by environmental protection and outbreaks were a drag on refinery production.); cumulative electrolytic copper production reached 2.4754 million tons in March, an increase of 14.99% over the same period last year.

However, it is worth noting that if the copper concentrate TC continues to fall for a long time, and the pressure on the smelter increases gradually, whether the output will be reduced or not still needs continuous attention.