In a pivotal meeting held in Shanghai, China’s leading copper smelters have announced plans to cut production by 5% to 10% and have opted against issuing guidance prices for copper processing charges (TC/RCs) for the second quarter. This decision underscores the challenges the world’s largest producer of refined copper is facing, including a short supply and significant declines in TCs in the spot market.
The China Smelters Purchase Team (CSPT), a consortium representing top smelters in the country, recognized the spot market’s detachment from genuine market fundamentals. “It is meaningless to set a guidance price in the current market,” stated one meeting attendee, highlighting the disconnection and the unprecedented market conditions.
This isn’t the first instance of CSPT refraining from setting guidance prices; a similar situation occurred in the second quarter of 2021. Despite previous proposals for output curbs in January, specific actions had not been implemented until now.
The meeting also marked the expansion of CSPT, with three new members joining the group. This expansion comes as the smelters navigate through supply shortages exacerbated by disruptions, notably the closure of the significant Cobre Panama mine.
TC/RCs, crucial for smelter revenue, are under pressure, with spot copper TCs in China experiencing an 80% decrease to $11.20 per ton since the end of December, reaching their lowest since 2013. This plummet has caused notable losses for smelters, particularly those reliant on spot purchases.
However, there’s a potential for recovery in spot TCs in the upcoming quarter as smelters initiate maintenance amidst ongoing supply shortages. China’s refined copper production saw a 10.7% increase in the first two months of the year, yet imports of copper ore and concentrate barely rose, underscoring the tightness in raw material supplies. 
