BEIJING (Reuters) - A copper smelter in Southwest China has declared force majeure on deliveries of copper concentrate, two sources briefed on the matter said on Friday, as a coronavirus outbreak in the country heightened fears about a hit to demand.
Guangxi Nanguo Copper, with production capacity of 300,000 tonnes per year, is the first smelter in China to declare force majeure following the virus epidemic, which has killed more than 600 people and sparked concerns about copper demand in the world’s biggest consumer of the metal.
One of the sources, with a major bank, said the force majeure related to copper concentrate cargoes that had not been nominated or had letters of credit issued.
“So it’s not really a credit issue ... just that as production is being cut down there is less need to take material.”
“With various places sealed off and traffic control in connection with the virus, I think there is ground to raise force majeure,” the source added.
A second mining source said he had heard from other main suppliers to Guangxi Nanguo about the force majeure. His company did not supply much concentrates to the smelter and hence did not directly receive the notice.
Lackluster demand for sulphuric acid, a byproduct of copper production, due to factory closures including those in the manufacturing hub and epicenter of coronavirus Hubei means many copper smelters are exacted to cut production.
Copper smelters will reduce production by more than 15% in February from the previous month, Chinese research house Antaike said earlier this week, citing high stocks of byproduct sulphuric acid and logistical constraints that could force output cuts.
Three other sources, including one at Nanguo supplier China Minmetals Corp [CHMIN.UL], said the company had asked for shipments to be delayed but were unsure if there had been an official force majeure declaration. A Minmetals spokesman was unaware of the matter.
The second of these sources, who also supplies concentrate into China, said Nanguo was on maintenance in January and decided to ask for deliveries to be suspended due to the virus, a lack of manpower and transportation problems.
The third source, another supplier to Nanguo, said the firm had temporarily shut production but could resume next week.
Calls to Guangxi Nanguo, which only started up its smelter last year, went unanswered on Friday and the company did not immediately respond to an emailed request for comment.
Reporting by Tom Daly, Shivani Singh and Beijing Newsroom; Editing by Shri Navaratnam