The development of the non-ferrous metals industry may be impacted by chemical industry policies.[SMM Analysis]

Since the end of 2023, with the collapse of the fundamental supply-demand dynamics of copper concentrate, the spot TC in the copper concentrate market has also experienced a sharp decline. The spotTC/RCs for copper concentrate has continuously fallen to a historically low level, reaching around -40 USD. As the distortion in the copper concentrate spot market intensifies, the revenue from smelting acid has become increasingly important for smelters’ overall earnings.

As the spot TC for copper concentrate declined, the prices of smelting acid across China began to rise and have continued to do so until now. For Chinese smelters, this is akin to timely assistance, as it largely helps offset some of the losses from the spot or long-term contract TC of copper concentrate. Currently, sulfuric acid revenue accounts for 70%–80% of the raw material earnings of copper smelters.

In recent years, the state has placed great emphasis on agricultural development and has introduced a series of policies to support it. However, the persistent increase in acid prices will raise the cost of fertilizers for farmers, thereby dampening their enthusiasm for agricultural production. To address this, on the morning of December 18, the China Sulfuric Acid Industry Association, in collaboration with the China Phosphate and Compound Fertilizer Industry Association, held a meeting titled "Fully Supporting the Fertilizer Industry in Ensuring Supply and Stabilizing Prices, Deeply Implementing the Relevant Instructions of the National Development and Reform Commission." The meeting called on the sulfuric acid and phosphate fertilizer industries to prioritize ensuring supply and stabilizing prices for fertilizers. Key requirements include:

1. Both the sulfuric acid and phosphate fertilizer industries must enhance their political stance and treat supply security and price stability as key tasks.

2. Sulfuric acid exporters should prioritize ensuring domestic supply by actively reducing export volumes. If exports are necessary, the export price must not be lower than the domestic price during the same period.

3. Smelting acid enterprises should not exceed the sulfuric acid sales price level of December 11, 2025, to ensure stable market operations.
   On the afternoon of December 25, relevant national authorities organized a special meeting on fertilizer supply security, attended by PetroChina, Sinopec, the China Sulfuric Acid Industry Association, the China Phosphate and Compound Fertilizer Industry Association, and the China Agricultural Means of Production Circulation Association, among others. The meeting clarified that PetroChina and Sinopec, as central state-owned enterprises, would take the lead in shouldering the responsibility of ensuring fertilizer supply by selling sulfur to key phosphate fertilizer producers at fair prices under long-term cooperation agreements.

Chemical industry policies are closely linked to the development of the non-ferrous metals industry. The recent intensive introduction of chemical industry policies tends to prioritize safeguarding agricultural interests, but this could directly lead to two outcomes in the non-ferrous metals industry:
On one hand, Chinese copper smelters may face potential losses in sulfuric acid revenue, which is vital to their operations.
On the other hand, copper smelters may encounter risks of sulfuric acid overstocking. According to SMM's calculations of China's sulfuric acid apparent consumption, it is evident that sulfuric acid exports account for only about 2%–4% of the apparent consumption. Additionally, liquid sulfuric acid produced by Chinese copper smelters is not as easy to store as solid sulfur, requiring careful consideration of each smelter’s acid storage capacity. Although sulfuric acid exports are not significant compared to the total domestic supply, restricting exports could easily lead to sulfuric acid overstocking at copper smelters, thereby suppressing the utilization rate of copper primary smelting.