China's Copper Smelters Face Perfect Storm of Reduced Scrap and Low Sulfuric Acid Prices

China's copper smelters are facing a significant challenge as they head into the final quarter of the year. A combination of factors, including a tax crackdown and an ongoing shortage of copper concentrate, has reduced the availability of scrap for processing. This has left plants with less flexibility to switch between different feedstocks, effectively removing their 'safety valve'.

The result is that some producers are choosing to slow down production rather than maximize output. With sulfuric acid prices down 11% so far in September, according to Oilchem, smelters are struggling to maintain profits. This has led to plans for maintenance at seven Chinese smelters, which could cut refined output by about 80,000 metric tons.

The impact of this reduction will be felt first in the spot market, where 'need-it-now' copper is often sourced quickly. A pause in production can lead to wider spreads between near-dated and later contracts, increasing hedging costs for manufacturers and traders who rely on prompt deliveries.