China Copper Smelters Cut Output on Acid Export Ban
Chinese copper producers may reduce output as a pending ban on sulphuric acid exports lowers byproduct revenue. The move follows record low processing fees.
Smelters in China are likely to move forward with production cuts as a pending government ban on sulphuric acid exports threatens to eliminate the byproduct revenue that has previously cushioned the impact of record-low processing fees. As the world’s largest producer of Copper, Chinese firms have recently benefited from high acid prices—driven by battery sector demand and shipping disruptions through the Strait of Hormuz following the start of the war in Iran—to offset the plummeting treatment charges paid by miners.
The economic landscape for these processors is shifting as Beijing prepares to halt outbound shipments of sulphuric acid starting in May. This move, intended to secure domestic supply for the spring fertilizer season, follows the introduction of a quota system earlier this year. Analysts expect the resulting domestic surplus to cool acid prices, forcing smelters to confront the collapse in copper concentrate processing fees, which hit a historic low of minus $77 per ton on April 10.
\"Acid prices may slow down their rising pace or even flip into a fall, but neither is good for us,\" said an official with a Chinese smelter.
Industry observers suggest that many facilities may now choose to bring forward planned maintenance to manage the drop in byproduct revenue and mitigate inventory risks associated with the export halt. Ronan Murphy, head of base metals pricing at Argus, noted that the high byproduct prices had previously allowed smelters to maintain high output levels despite the collapse in treatment charges.
\"It reflects that high byproduct prices have limited the requirement for smelters to reduce output even in the face of a collapse in treatment charges.\"
The export ban is expected to have significant international repercussions, as China exported 4.65 million tons of sulphuric acid last year. Major recipients of these shipments included Chile, which received 32% of the total, and Indonesia, which accounted for 15%. Buyers in these regions may now be forced to seek alternative sources in a global market already tightened by geopolitical instability.
