Chinese Copper Smelters Face Margin Collapse, Switch Off Plants

Unprecedented Maintenance Highlights Industry Struggles

Major copper smelters in China, the world’s top consumer of the metal, have begun shutting down plants for equipment maintenance during what is typically a peak demand season, as they grapple with a severe feedstock shortage and collapsing profit margins. This unusual move underscores the deepening crisis in the Chinese copper smelting industry, driven by a scarcity of copper concentrate and rampant overcapacity that has intensified competition for raw materials. Industry insiders report that approximately 980,000 metric tons of smelting capacity, representing 8% of China’s total output from the previous year, is scheduled for maintenance this month, a figure significantly higher than in previous years, according to Hongyuan Futures. Analysts and smelter managers confirm this level of downtime is unprecedented for March, a period when demand traditionally surges post Lunar New Year. The decision to scale back operations reflects a desperate attempt to curb losses as treatment and refining charges, a critical revenue stream for smelters, have plummeted below zero, forcing operators to pay miners to process copper concentrate into refined metal.

The root of this crisis lies in a combination of global supply disruptions and domestic overcapacity within the Chinese copper smelting sector. Since late 2023, the supply of copper concentrate has tightened due to operational setbacks at key mines, such as First Quantum’s Cobre mine in Panama, alongside ongoing expansions of smelting capacity worldwide. This has created a mismatch between the availability of raw materials and the industry’s ability to process them. In China, where copper is essential for wiring, machinery, and emerging new energy technologies like electric vehicles and solar panels, smelters have historically ramped up production to capture market share, contributing to a global imbalance. However, with copper concentrate now in short supply, the overcapacity has backfired, driving fierce competition that has eroded profitability. Staff at three major smelters confirmed to Reuters that maintenance began this month, while Tongling Nonferrous Metals Group, a heavyweight responsible for 13.5% of China’s refined copper output in 2023, initiated a month-long overhaul of some equipment in early March, according to sources familiar with the matter. These shutdowns aim to reduce consumption of scarce concentrate, stabilize the market, and halt the freefall in processing fees, though the impact remains uncertain.

This wave of maintenance is highly unusual for the Chinese copper smelting industry, as March typically marks a period of heightened activity rather than downtime. Historically, smelters capitalize on post holiday demand before scheduling maintenance in April or May. The shift in strategy highlights the severity of the current predicament, with some operators reporting losses of up to $414.47 per ton of refined copper on spot cargoes, while analysts estimate average losses ranging from $138.16 to $276.31 per ton. The negative treatment and refining charges, which hit a record low of $26.5 per ton and 2.65 cents per pound on March 7 according to Fastmarkets, have flipped the traditional revenue model, leaving smelters financially strained. A manager at one Chinese smelter lamented that unlike last year, when long term contracts offered some relief, the industry is now hemorrhaging money regardless of the situation. The pain is not unique to China, Glencore’s Pasar smelter in the Philippines was placed on care and maintenance in February, though Japanese smelters may weather the storm better due to diversification and secured supply agreements.

The challenges facing Chinese copper smelters have put the spotlight on the upcoming March 31 quarterly meeting of the China Smelters Purchase Team (CSPT), where industry leaders are expected to discuss potential production cuts and other measures to address the crisis. Experts like Patricia Barreto from S&P Global Commodity Insights warn of a significant risk of large scale output reductions this year, which could ripple through global markets. A coordinated reduction in refined copper production might force China, the world’s largest supplier of the metal, to increase imports, tightening global supply and potentially driving up prices. Analysts from Antaike and Shanghai Metals Market have already revised down their forecasts for copper concentrate output growth in 2025, citing lower expectations from producers, a trend echoed in research notes from Citi. For an industry that plays a vital role in regional economies, production cuts are a sensitive issue, yet the current overcapacity mirrors struggles seen in other Chinese sectors like steel and oil refining, where expansion has outpaced demand.

As the Chinese copper smelting industry navigates this turbulent period, the stakes are high for both domestic operators and the global market. The maintenance shutdowns, while a short term fix, signal deeper structural challenges that may require more drastic action. With profit margins evaporating and competition for copper concentrate intensifying, smelters are caught in a precarious balancing act, striving to survive amid an oversupplied refining landscape and a constrained raw material base. The outcome of the CSPT meeting could prove pivotal, determining whether China’s copper industry can adapt to these pressures or if further disruption lies ahead, reshaping the flow of refined copper worldwide.