As the world’s largest consumer of copper, China is expected to produce about half of the global refined metal this year, production capacity continues to grow. If this rapid expansion continues—and forces reductions elsewhere in the world—then more of the output will be concentrated in China.
An analyst has stated that China’s overproduction impacts the future of copper refining abroad. He noted that shipping routes from Chile to Europe and India may face problems.
This week, Asia’s largest copper industry conference will be held in Shanghai, where smelters will engage in crucial negotiations over ore supply contracts that will determine their profits. The situation is reaching a peak. With production capacity far exceeding global mine output, miners hold the upper hand in annual negotiations.
Industry estimates suggest that the treatment and refining fees paid to smelters for converting ore into metal could drop from $80 per ton in 2024 to $40 or lower next year. According to metal consulting firm CRU Group, the previous lowest price was $43 per ton in 2004, based on data traceable back to 1992.
In the coming decades, the demand for renewable energy, electric vehicles, and grid infrastructure is expected to surge. This has stimulated more investment in the copper supply chain, but the speed and cost of building smelters are significantly higher than those of new mines.
India is seeking to reduce its dependence on imports, while the Indonesian government plans to halt exports of ores currently supplied to smelters across Asia, exacerbating the ore shortage situation.
China remains a net importer of copper and is currently not exporting in large quantities overseas; however, this could change if China’s production capacity continues to expand.
Despite this, there are skeptics. Some analysts believe that due to the cost advantages of Chinese producers, they are better able to withstand this environment than other producers. Most old and inefficient plants have been decommissioned. In recent years, large private smelters have exited the industry, while state-owned enterprises, which dominate the sector, are better equipped to withstand financial pressures.
