Copper declines on stronger dollar, Chinese measures on the industry

Copper prices declined on Thursday as the US dollar strengthened against most major currencies and investors assessed China’s regulatory moves targeting the country’s copper smelting industry.

A state-run Chinese media outlet reported Thursday that China, the world’s largest copper smelter, is exploring ways to tighten oversight on capacity expansion, as record-low treatment charges have eroded company profits.

Chen Xuexun, vice president of the China Nonferrous Metals Industry Association, said during a Wednesday meeting that low treatment and refining charges (TC/RCs) represent the “most prominent” challenge facing the sector.

He added that fees paid by miners to smelters have been hurt by what is known in China as “involution-style competition” — an intense rivalry so destructive it undermines the industry itself. This follows massive smelting capacity expansions that have outpaced mined copper supply, constraining concentrate availability.

Chen stated: “Involution-style competition has harmed both industry and national interests, so copper companies must firmly oppose it. The association has proposed specific measures to strictly control capacity expansions.”

In early July, Chinese policymakers pledged to tackle “disorderly price competition,” raising hopes of supply-side reforms in industries plagued by overcapacity. That announcement pushed up prices of commodities such as lithium and coal at the time.

However, copper prices barely moved in July, even as output fell 2.5% from a record high in June.

Treatment charges have since plunged to record lows, with some Chinese smelters agreeing to process copper for Chile’s Antofagasta at zero fees under a long-term contract. Spot TC/RCs have remained in negative territory since last December.

Risks facing Chinese smelters — also the world’s largest copper consumers — have grown after Freeport-McMoRan cut its copper production outlook in Indonesia, a move analysts said contributed to higher global copper prices.

Three-month benchmark copper on the London Metal Exchange rose 1.02% to $10,442 per metric ton by 10:09 GMT on Thursday, after hitting its highest level in 15 months earlier in the session.

Attendees at Wednesday’s industry meeting included major Chinese smelters such as Jinchuan Group, Jiangxi Copper, Tongling Nonferrous, China Copper, Daye Nonferrous, China Minmetals, and Zijin Mining, according to the state-backed China Nonferrous Metals News.

Meanwhile, the dollar index rose 0.5% to 98.3 by 15:43 GMT, touching a high of 98.3 and a low of 97.7.

In trading, December copper futures fell 1.1% to $4.76 per pound as of 15:37 GMT.