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China's medium-size copper firms cut output on scrap shortage
May 2, 2013 / 4:52 AM / in 5 years

China's medium-size copper firms cut output on scrap shortage

* Yantai Penghui, North Copper cut refined metal output

* Yantai’s April output down 20 pct y/y, bearish on H2 scrap supply

* North Copper expects 2013 output to miss target by 20 pct

By Polly Yam

HONG KONG, May 2 (Reuters) - At least two medium-sized refined copper producers in China have cut output due to a shortage of scrap, a move that may be replicated by bigger smelters, as falling metal prices crimp supply of the raw material.

Global copper prices have dropped 14 percent this year, denting scrap values and prompting overseas suppliers to curb sales to China, the world’s top producer and consumer of refined copper. Domestic suppliers are also holding back stocks.

About a third of China’s 6 million tonnes of annual output of the refined metal is made from scrap.

“We have not been able to buy scrap for almost one month now,” said Wang Gang, the head of the trading department at Yantai Penghui Copper Industry Co Ltd in the northeastern province of Shandong.

“Our production in April was cut by about 20 percent from the same time last year. Should this continue, our production will fall by 15 percent in the second quarter from a year ago,” Wang told Reuters.

Yantai Penghui, partly owned by China’s top refined copper producer, Jiangxi Copper Corporation, produced about 110,000 tonnes of the refined metal last year.

About half of its refined copper is made from copper scrap and anode, a semi-processed material from copper scrap, while the rest uses concentrate.

“The problem is that our facility using concentrates is already running at capacity. So, while we have high concentrate inventory, we cannot turn that into metal,” Wang said, without giving an estimate for total output this year.

“It is hard to say, for now, how much we can produce in the second half. It depends on the supply of scrap. For now, we are pessimistic about the supply,” he added.

Another medium-sized producer, North Copper, has also cut its output target for this year due to scrap shortage.

“We are already cutting production. For this year, the production could be about 20 percent lower than our targeted 120,000 tonnes,” said a source at the copper producer in the northern province of Shanxi.

Copper scrap shortage may force the Jiangxi Copper’s listed arm to cut production from May, a senior executive said last week.

Supply of copper scrap in the domestic market has also dwindled due to Beijing’s battle against pollution, which has cut orders for imports of the low-grade raw material. (Editing by Himani Sarkar)

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