Expectations of Copper Cathode Production Cuts Fade from Market View [SMM Analysis]

Since April 2024, CSPT members have repeatedly called for joint production cuts to mitigate the impact of low TC caused by the supply shortage of copper concentrates. However, according to data from the SMM survey, the anticipated reduction in China's copper cathode production has not materialized. In fact, expectations of production cuts have gradually faded from the market view. In August, China's copper cathode production was 1.0135 million mt, down 14,700 mt MoM (1.43%), up 2.48% YoY, and 10,100 mt higher than the expected 1.0034 million mt. From January to August, the cumulative production was 7.96 million mt, up 485,900 mt YoY (6.5%). SMM believes that the anticipated joint production cuts have not been realized due to several reasons:

First, the supply of imported copper concentrates to China has increased, providing favorable conditions for the production of copper cathode by Chinese smelters. According to data from the General Administration of Customs, in August 2024, China imported 2.574 million mt of copper concentrates and ores, up 18.9% MoM, down 4.6% YoY. From January to August, the cumulative imports of copper ores and concentrates were 18.635 million mt, up 3.2% YoY.

Second, in H1, the inflow of copper scrap into smelters increased the production of copper anode from scrap, aiding the capacity release of copper cathode production. Benefiting from two significant copper price rallies in H1, copper scrap supply increased accordingly. Due to the high demand for raw material substitutes by smelters, very favorable TC was offered for copper anode from scrap, leading many downstream recycling enterprises to switch to producing copper anode. Data from the SMM survey shows that the proportion of copper scrap involved in copper cathode production has been at a high level this year.

Lastly, although many smelters have faced reduced copper cathode production due to copper concentrate shortages, maintenance activities, and Q3 copper scrap supply shortages affecting recycling enterprises' copper anode production, several new and expanded copper cathode capacity projects have strongly supported production levels. These include the continuous capacity release of copper cathode after the relocation of Southwest Copper, the commissioning of new capacity at Humon Weihai, the start of production at Baotou Huading in August, and the gradual increase in copper cathode production from Jinchuan Group's Yongchang Phase I project, which began trial production at the end of June.