Chinese copper smelters are under increasing financial strain as sulphuric acid prices plummet, eroding a crucial revenue stream that had previously helped mitigate losses from negative processing fees. The industry, which accounts for over half of global refined copper production, is now facing a dual challenge that has led some operators to extend maintenance outages this quarter, potentially resulting in the slowest output pace in decades.
Major smelters like Jiangxi Copper and Yunnan Copper reported significant profit declines in the third quarter compared to the previous quarter, according to Reuters calculations based on company filings. Smelters typically earn treatment and refining charges (TC/RCs) for converting copper concentrate into refined metal, but a severe ore shortage has forced them to accept negative spot TC/RCs for nearly two years, effectively paying for raw material supply.
Until this summer, smelters found some financial relief through byproduct revenues, particularly from sulphuric acid. However, Chinese sulphuric acid prices have dropped to about 1,484 yuan ($222.50) per metric ton from a July peak of 2,107 yuan, according to data from Zhuochuang. Analyst Tom Price noted that if the US-Iran war ends, further price declines are expected. Spot copper treatment charges also hit a record low of minus $246.40 a ton on October 30.
Production cuts are anticipated, with some smelters already shutting down units for maintenance due to declining profitability. Daye Nonferrous, a member of the China Smelters Purchase Team (CSPT), warned in an exchange filing that falling sulphuric acid prices are exacerbating operational challenges. Analyst Yang Hua from Mysteel cautioned that smelters will face tremendous pressure in 2027 as both acid prices and processing fees continue to fall.