China Copper Smelters Mostly Unprofitable, Daye Says
2007-10-09 09:55 (New York)
By Xiao Yu
Oct. 9 (Bloomberg) -- Copper smelting in China, the world's
largest user of the metal, is mostly unprofitable because of a
drop in processing fees, said Daye Non-Ferrous Metals Co., the
nation's fifth-biggest processor.
Smelting fees paid to smelters for annual contracts starting
Jan. 1 may decline by as much as 17 percent to $50 for each
metric ton of metal extracted, Shu Yishan, manager of Daye's
trading company, said in an interview today. Refining fees may
fall by as much as 17 percent to 5 cents a pound, Shu said. Below
that, all Chinese smelters would be unprofitable, he said.
``Smelters are having a very difficult time,'' Shu said in
London. ``Some have been forced to delay the start of new
capacity or close plants.''
Copper smelters derive income from so-called treatment and
refining charges paid by mining companies. The fees have dropped
this year because there hasn't been a sufficient supply of
concentrates, the raw material shipped from mines, to fill
smelting capacity. BHP Billiton Ltd., the world's largest miner,
is among companies to have demanded lower fees.
China's copper producers, led by Tongling Nonferrous Metal
Co., are meeting miners in London this week for preliminary talks
for full-year fees. Negotiations will last until November, Wang
Chiwei, executive director and vice president of Jiangxi Copper
Co., said in July.
Officials from nine smelters met in July to discuss output
cuts of between 10 and 15 percent, according to executives from
two of the companies who asked not to be identified because the
talks were confidential.
Smelter Consensus
``It's only a matter of time before we see larger scale
cuts,'' Shu said. ``The government should intervene to help reach
a consensus among smelters.''
Bigger producers such as Jiangxi Copper Co. may be reluctant
to cut output, while smaller ones support it, Shu said.
State-owned Daye, based in Huangshi, central Hubei province,
is China's oldest copper producer and a member of China's Copper
Smelters' Purchase Team, which represents the country's biggest
producers.
Daye plans to increase production 23 percent this year to
250,000 tons of refined copper. It will keep output unchanged in
2008, Shu said. The company's clients include Melbourne-based BHP
Billiton.
--Editor: Casey (msh/ttt). |
