Copper extends losses after Chinese measures

Copper prices fell on Friday as markets assessed Chinese government measures to regulate the country’s copper smelting industry, despite a weaker US dollar against most major currencies.

A Chinese state-run media outlet reported on Thursday that the world’s largest copper smelting nation is considering tighter oversight of smelting capacity expansions, at a time when record-low treatment charges have severely squeezed company profits.

Chen Xuexun, vice chairman of the China Nonferrous Metals Industry Association, said during a Wednesday meeting that falling treatment and refining charges (TC/RCs) were the industry’s “most prominent” problem.

He added that the fees miners pay smelters for processing have been hurt by what in China is called “involution-style competition” — a race so intense it becomes self-destructive. This comes after a massive expansion in smelting capacity outpaced mined ore supply, tightening concentrate availability.

Chen said: “Involution-style competition has damaged the interests of the industry and the country, so copper companies must firmly oppose it. The association has proposed specific measures to strictly control the expansion of smelting capacity.”

China’s political leaders announced in early July that they would act against “disorderly price competition,” raising hopes in the sector for supply-side reforms in industries suffering from overcapacity. That move pushed up prices of commodities such as lithium and coal that month.

However, copper prices in July barely moved, even as output dropped 2.5% from June’s record levels.

Treatment charges fell to all-time lows, to the point that some Chinese smelters agreed to process copper for Chilean miner Antofagasta with no fees under a long-term contract. Spot charges have remained negative since last December.

Risks facing Chinese smelters — also the world’s biggest copper consumers — have increased further after Freeport-McMoRan cut its copper production outlook in Indonesia, which analysts said helped push copper prices higher.

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 earlier hitting a 15-month high.

Wednesday’s industry meeting was attended by representatives of China’s major copper smelters, including 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 US dollar index fell 0.4% to 98.1 by 15:51 GMT, after hitting a high of 98.5 and a low of 98.1.

In trading, December copper futures fell 0.7% to $4.72 per pound by 15:57 GMT.