Copper smelters in China, the world’s biggest maker of the refined metal, agreed to cut output by 350,000 tonnes next year, joining the nation’s zinc and nickel companies in curbing production as they respond to prices that have tumbled to the lowest level in at least six years.
China’s top suppliers, including Jiangxi Copper Co (江西銅業) and Tongling Nonferrous Metals Group Co (銅陵有色金屬集團), pledged to reduce output after a meeting in Shanghai, according to a statement from 10 smelters. The amount is equivalent to about 4.4 percent of the country’s annual output last year, based on figures from the Chinese National Bureau of Statistics. The nation accounts for 24 percent of world refined copper supply, according to Bloomberg Intelligence.
The smelters are to make cuts and take other necessary measures “to maintain the healthy development of the industry,” according to the statement. The companies vowed to stop building new capacity, urged the government not to approve new smelters, and said they would push for mergers and acquisitions to maintain stable capacity in the nation’s copper industry.
Copper has fallen 27 percent this year as China’s slowing economy weakens demand for raw materials used in construction and infrastructure. Goldman Sachs Group Inc analyst Fu Yubin last month said that China’s commodities markets are in the middle of a hard landing, noting “a long list of potential catalysts for copper’s next major move lower.”
Copper on the London Metal Exchange (LME) rose 0.3 percent to US$4,598 per tonne by 6:10pm in Shanghai, after earlier trading lower ahead of the smelters’ announcement.
The nation’s nickel and zinc smelters have already said they would curb production amid a rout in commodities that has dragged the LME index of base metals to its lowest since April 2009. The cuts have failed to overturn poor sentiment, as investors are more concerned about Chinese demand and high inventories, as well as whether the cuts will be fully implemented or replaced by lower-cost output elsewhere.
The firms also asked the government to support the copper market by buying and storing the metal, as well as by regulating high-frequency trading, the statement said.
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