China’s leading copper smelters have proposed production cuts of 5% to 10% and opted not to issue guidance prices for copper treatment charges (TCs) for the second quarter, following a meeting of the China Smelters Purchase Team (CSPT) in Shanghai. The decision comes in response to supply constraints, plummeting TCs, and market disconnect, with top smelters acknowledging the need for strategic adjustments in light of prevailing market conditions.
The spot market’s divergence from true market fundamentals has led to the postponement of guidance price setting, reflecting the challenges faced by the industry. Citi analysts anticipate that potential production curtailments, driven by unfavorable spot TCs, could lend support to copper prices amid supply constraints. Despite projections of deficits in the global copper market for 2024 and 2025, with estimates pointing towards rising average prices, the benchmark three-month copper price on the London Metal Exchange experienced a slight decline.
The market reaction suggests that the output cut plan had already been factored into pricing, following an earlier surge to an 11-month high. CSPT’s plans for expansion, including the addition of three new members, underscore ongoing efforts to navigate market uncertainties and enhance industry collaboration. The industry’s response to supply shortages, driven by disruptions like the closure of the Cobre Panama mine, highlights the resilience and adaptability of Chinese copper producers amidst evolving market dynamics.
Despite efforts to manage output levels, China’s refined copper production has shown a notable increase, with further growth anticipated in the coming year. As the industry grapples with supply challenges and pricing volatility, strategic adjustments and collaborative initiatives are crucial to navigating the evolving landscape of the global copper market.