China Defies Global Copper Squeeze with Near-Record Production

BEIJING – While the global copper market contends with fears of a shortage, driving prices to unprecedented levels and igniting a $49 billion takeover battle, China stands apart with an ample supply of the metal. As the world’s largest producer and consumer of refined copper, China’s thriving smelters maintain near-record production levels despite a global scarcity of raw materials.

China’s robust copper smelting industry, expanding continuously, is a central factor in this disparity. Higher copper prices have incentivized the processing of more scrap metal, ensuring that production remains high even amidst supply challenges.

Initially, smelters had pledged to reduce capacity when fees plummeted due to a supply squeeze on imported ore, a critical feedstock. However, anticipated production cuts have not materialized, and China’s faltering economy struggles to absorb the excess copper. This surplus has led to a retreat in copper prices, which have fallen to just above $10,300 per ton, despite a 21 percent gain for the year. The ongoing oversupply in China suggests that copper prices may face resistance in making further gains.

Liang Kaihui, an analyst with Shanghai Metals Market, highlighted that the surge in copper prices has led to an increased availability of scrap from discarded pots, pipes, and wires. Fabricators have been actively converting this scrap into blister copper, a semi-processed form, which is then fed back into smelters as a substitute for the now scarce overseas ore.

The abundance of scrap is evident in its significant discount to refined copper, which expanded to 4,615 yuan ($876) per ton last week, marking the widest gap in at least eight years, according to SMM.

Despite the market dynamics, China’s smelting industry continues to add capacity. Individual firms, focused on maintaining market share, prefer to operate at reduced margins as long as profitability persists. Moreover, local governments encourage continuous metal production to meet economic growth targets and sustain employment levels.

China’s unique position in the global copper market, characterized by its high production and substantial scrap metal availability, continues to defy the broader trend of supply constraints, highlighting the complex interplay of global and local market forces.