Limited Impact Expected from Elimination of 144.9 kt Inefficient Capacities

SHANGHAI, Aug. 10 (SMM) – China’s Ministry of Industry and Information Technology announced on August 8th that more than 2,000 companies in 18 industries are required to shut outdated manufacturing capacity by the end of September. The list of companies required to close inefficient capacity includes 6 copper smelters. SMM believes that any negative impact from the round of inefficient capacity elimination will be limited on the copper market. 

First, the total number of inefficient capacity to be closed at these 6 copper smelters is 144.9 kt. According to SMM data, China’s crude copper smelting capacity is 3.3 million mt in 2009, and inefficient capacity to be eliminated accounts for 4.39% of China’s total crude copper smelting capacity. In addition, SMM expects that China’s crude copper smelting capacity will increase 900 kt to 4.2 million mt in 2010. If those involved copper smelters shut the inefficient capacities by the end of September as schedule, China’s total crude copper smelting capacity will increase to 4.05 million mt in 2010, with a growth rate of 23%. Hence, the closure of inefficient copper capacity will leave limited impact on China’s crude copper market.

Second, equipment targeted for closure at these 6 copper smelters mainly includes blast furnace and reverberatory furnace, which are used for crude copper smelting. SMM contacted companies involved in inefficient capacity elimination, such as Yunnan Copper, and Baiyin Non-ferrous Metal Group concerning the matter. Those companies told SMM that blast and reverberatory furnaces are technologies in the initial stage of copper smelting development, and with higher pollution and energy consumption compared with new technologies, and it is a matter of time for them to be eliminated. In addition, one official from BAiyin Non-ferrous Metal Group told SMM that the company has conducted technical upgradation of old copper smelting equipment, and elimination of inefficient capacity is the company’s plan this year. Hence, the company’s production will not be affected by this.

Although no major impact will be on domestic copper market from the round of inefficient capacity elimination, such a move suggests Central Government’s determination in managing enterprises with high-pollution, high energy-wasting and resource-based products, and upgrading product structure. Such an effort also has sent a warning bell to companies with outdated equipment, to stimulate their motivation to actively upgrade their production lines.

Copper Smelters Involved in the Round of Inefficient Capacity Elimination

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