SMM slashes its China copper production growth forecast for 2019

YIXING, Aug 29 (SMM) – China copper output will grow less than previously expected this year, said Ye Jianhua, chief copper analyst at SMM, on Thursday, citing the slower-than-expected ramp-up of new capacity and unexpected disruptions at some smelters.

Production of copper cathode across the country is expected to increase by 200,000-300,000 mt in 2019, Ye told delegates at the 2019 SMM Electric Materials Summit in Yixing of east China’s Jiangsu province. SMM data showed that copper output rose 9.1% to 8.73 million mt in 2018.

Copper apparent consumption, which refers to production and net imports, slipped 5%, or 350,000 mt, year on year in the first half of the year, showed SMM calculations based on Customs data. Concentrated maintenance lowered production by 50,000 mt. Imports shrank 260,000 mt, while exports expanded 40,000 mt.

Supply decline and ore tightness supported copper prices, but failed to prop prices up, given weak demand and supply recovery.

Chinese copper smelters recovered from concentrated maintenance in June, as evidenced by higher production and moderately rising inventories across the Shanghai Futures Exchange-approved warehouses in the third quarter.

Copper processors, meanwhile, are scaling back operations. An SMM survey showed declines in operating rates across Chinese manufacturers of copper products for June, as the tariff war with the US dented demand. The home appliance sector was strongly hit in export business.

Smelting capacity spike pressured treatment or refining charges for copper concentrate. SMM assessments showed that TCs for spot, clean ore currently stand at $53-56/mt, compared with above $90/mt in the first half of the year. Some small smelters, who are not members of the China Smelters Purchase Team, are considering even lower offers.

Continued import losses and the poor appeal of copper scrap offered some relief to the domestic copper market. The discounts or premiums for spot domestic copper remained stable since April.

As the import arbitrage window remained closed, limited seaborne copper entered the domestic market, with prices of hydro-copper, which is produced through hydrometallurgical process and imports are the major source of such materials, sharply higher. Tight scrap supplies, meanwhile, drove users to use hydro-copper as an alternative.