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China’s copper crisis

China’s 18 top copper processors are convening tomorrow to address the burgeoning crisis in copper concentrate supplies, marking a pivotal moment for the world’s largest copper processing industry. The sector, responsible for over half of global copper output in 2023, faces challenges sourcing materials amidst mining shortfalls and heightened competition from India.

The looming supply crisis is poised to ignite a surge in metal prices, already evidenced by a 1% rise to $US3.93 a pound on Comex, the highest since July. Despite the urgency, the meeting in Beijing is not expected to endorse production cuts. Instead, a government-driven strategy is likely, aiming to expedite maintenance schedules to alleviate pressure on the sector.

The focus has shifted to concentrate volumes, exacerbating the shortage following the closure of the Cobre Panama mine and production setbacks at other key mines. Anglo American’s reduction in copper output further compounds the issue.

The dwindling supply has prompted Chinese smelters to reduce charges in a bid to attract materials. This downward trend in treatment and refining charges signals impending shortages in the global copper market, posing dire financial implications for the industry.

Adding to the complexity, India’s entry into the market with Adani’s Mundra copper smelter and Indonesia’s push for local refining capacity reshapes the competitive landscape.

Meanwhile, Australia’s copper exports to China have been impacted by geopolitical tensions, constraining a potential solution to the supply crunch. However, initiatives such as BHP’s expansion plans at Olympic Dam offer a glimpse of hope amid the prevailing uncertainty.