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China's top nine copper smelters to cut output

https://www.chemnet.com   Aug 06,2007 Metals Place
China's top nine copper smelters plan to jointly cut production by 10 to 15 percent in the second half of this year, a move analysts say may push up domestic copper prices after August.

Higher prices in China, the world's top copper consumer, would stimulate imports and possibly drive up world copper prices , analysts said.

The China Smelters Purchase Team, a group comprising the top nine copper smelters in the country, said on Friday the smelters would collaborate to reduce smelting production to cut the use of imported concentrates due to low processing fees, which have fallen 70 percent from mid-2005 for spot deals.

"Our action is aimed at cutting imported concentrate," a Shanghai-based official of the team said.

China's copper imports were high in the first half and domestic smelting capacity increased, keeping Chinese copper prices below world prices.

Processing fees for imported copper concentrate have fallen, resulting in losses for Chinese smelters, the team said in a statement.

The fees are paid by overseas sellers of copper concentrate to Chinese smelters and then deducted from the sale price, based on world copper prices.

"The reduction should have an impact on local prices," said Zhou Jie, a Shanghai-based analyst at China International Futures.

Chinese prices may start rising in September due to the cut and that could become an engine to push up world prices, an analyst in Shenzhen said.

"After lead, copper is the most likely metal to be bought by speculators," he said.

Wang Chiwei, executive director at Jiangxi Copper, said his firm was likely to reduce production.

But member smelters of the team had yet to agree on details of the joint reduction including volumes, he said.

"The percent of the cut should be based on 2007 output plans," he said.

"Our copper production may be less than what we had planned but will still be higher than last year," he said.

Jiangxi Copper, China's top producer of the metal, has said it intends to produce 25 percent more refined copper this year, or 550,000 tonnes, due to expanded capacity.

Other member smelters of the team are likely to cut smelting output through the repair and upgrading of facilities.

Yantai Penghui Copper would shut down 50,000 tonnes of smelting capacity from the end of August through the rest of this year for upgrading, a company official said. It would buy semi-finished materials to produce refined copper, he added.

Tongling Nonferrous, the parent of Anhui Tongdu Copper, has closed 40,000 tonnes of smelting capacity, while Daye Nonferrous has been repairing 50,000 tonnes of smelting capacity since July, industry sources said.

Zhongtiaoshan Nonferrous reopened its 90,000 tonne-a-year smelter this week after 55 days of repairs, a company official said, adding the smelter might not cut output for the rest of this year if there were sufficient raw materials.

Baiyin Nonferrous also completed an upgrade of its 80,000- tonne-a-year smelter in the first half and is operating at full capacity, a trading manager at the firm said.

Jinchuan Group plans to run production at a lower rate in 2007 to produce 250,000 tonnes of refined copper, out of 400,000 tonnes of capacity, due to insufficient supply of raw materials, a company official said.

Industry sources and analysts predicted the smelters would boost production if local prices surpass world prices as smelters could profit from importing concentrate and selling copper locally.

"It would depend on the differentials between Shanghai and world prices," the official at Zhongtiaoshan said of the duration of the joint reduction.

The team also groups Yunnan Copper and Jinjian Copper.
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