As China cuts production of electrolytic copper (refined copper), expectations for price increases are growing. China is the world's largest producer of electrolytic copper, accounting for about 40% of total output. As the supply of electrolytic copper shrinks, expectations are rising that domestic copper smelters' profitability will improve. However, demand-side companies such as home appliances could face higher cost burdens.
According to the London Metal Exchange (LME) on the 11th, as of the 9th, the copper price stood at $9,823 per ton (about 13.65 million won). This is 7.4% higher than last year's average price. This year, copper prices hit a high of $10,115 in June and fell to $9,553, but they have been rising as demand increases due in part to the U.S. import copper tariff under the Donald Trump administration.
In this situation, announcements of production cuts by major electrolytic copper producers are fueling projections that copper prices could rise further. Earlier, Japan's JX Metals announced plans to cut production by tens of thousands of tons, saying profits had shrunk due to excessive treatment and refining charges (T/RC) for copper. On top of that, China has halted tax rebates for metal fabricators, and Chinese smelters are planning production cuts.
As a support measure for the reverse invoice system introduced in April, Chinese local governments decided to refund taxes to metal fabricators. The reverse invoice system, introduced to improve tax transparency for copper scrap, requires buyers to issue tax invoices to sellers. Through this, the Chinese government has collected 3% or more of copper scrap transaction amounts as tax, and local governments have refunded it to preserve corporations' revenue.
However, late last month, when the National Development and Reform Commission (NDRC) of China banned the rebate measure, problems emerged in the copper scrap supply chain, and Chinese copper smelters began considering production cuts. In addition, with scheduled maintenance overlapping at five smelters capable of producing 900,000 tons annually, overall output is expected to decline.
Market research firms SMM and BMI projected that this month the operating rate at Chinese smelters will fall 8.3 percentage points from the previous month to 59.9%. They also expected electrolytic copper output to drop by 4% to 5%.
Because of this, there are forecasts that copper prices will exceed $10,000 per ton between September and October, when copper demand rises. The Korea Mine Reclamation and Mineral Resources Corporation said, "China's policy to restrict copper scrap supply and Japan's production cuts are acting as upward pressure on prices."
If copper prices rise, it could help the profitability of LS MNM and Korea Zinc, which smelt copper concentrate and sell it. That is because product prices can be raised in line with rising raw material prices. In addition, if the power infrastructure industry reflects higher costs in selling prices, revenue increases.
However, industries that find it difficult to pass copper price increases on to prices could see profits decline. The home appliance sector, which uses copper wire, finds it hard to immediately reflect higher raw material costs in consumer prices. The same goes for automakers, which use copper in batteries and electric motors.