Large Chinese copper smelters eye deeper production cuts: smelter executive

HONG KONG (Reuters) - Nine large copper smelters in China have agreed that they could deepen planned production cuts next year beyond 350,000 tonnes proposed earlier if prices and profitability deteriorate, an executive at one of the smelters said on Saturday.

An employee works at a electricity cable factory in Baoying, Jiangsu province, July 23, 2006.

The agreement followed a quarterly executive meeting by the producers on Saturday in Shanghai to discuss the concentrate and metal markets, and to assess progress since the production cuts agreed in late November.

The smelters are members of the China Smelters Purchase Team (CSPT) and the bulk are state-owned companies, including Jiangxi Copper, Tongling Nonferrous Metals and Jinchuan Group.

The smelters had agreed that the planned cut of 350,000 tonnes would be the minimum, and could be bigger if metal prices fell further and/or treatment and refining charges (TC/RC) for spot concentrate imports were lower than smelters’ costs, the executive said.

“We all agreed that we won’t conduct loss-making business...our production would depend on profit,” he said, declining to be identified since the meeting was private.

The smelters were responding to pressure from the central government to tackle oversupply issues facing the metals industry.

Previously, some smelters had resisted cutting production because local governments were targeting higher economic growth rates, the executive said.

The smelters were now willing to close capacity that did not meet environmental standards, or that was high cost, said the executive.

He did not give a price level at which the smelters could start making deeper cuts in refined copper production, nor specify spot TC/RCs that would be above the smelters’ costs.

Copper prices plunged to their lowest in more than six years in the domestic and international markets in the second half of 2015.

The smelters agreed that the term TC/RC of $97.35 per tonne and 9.735 cents per pound set by Jiangxi Copper and Chilean miner Antofagasta this week should be the benchmark for term 2016 concentrate imports in China, the executive said.

TC/RCs are paid to Chinese smelters by sellers to convert raw material copper concentrate imports into refined metal and are deducted from the smelters’ purchase prices.

Many smelters in China should be able to make profit with TC/RCs above $90 and 9 cents, industry sources have said.

Editing by Ed Davies