China's Tongling cuts copper output on low prices

Tongling Nonferrous Metals 000630.SZ, China's second-largest copper producer, has reduced refined copper output on low prices, company sources said on Friday.

Other Chinese smelters could follow Tongling's move if copper stays weak, which may help support domestic prices and push up fees the smelters receive for turning imported concentrates into metal next year, traders and analysts said.

The use of lower grade concentrate, the main material for the firm's smelting facilities, is also reducing metal output at Tongling, the executive said.

A source at Jinlong Copper, a subsidiary of Tongling, said the smelter was also cutting production. Jinlong is also partly owned by Japan's Sumitomo Metal Mining Co Ltd.

Tongling, including Jinlong, has the capacity to produce about 650,000 tonnes of refined copper a year, about 16 percent of China's total.

Spot copper traded at about 33,000 yuan a tonne in Shanghai on Friday, down 42 percent so far this month, due to weak demand and lower international prices.

Copper for delivery in three months on the London Metal Exchange fell more than 5 percent to $3,825 a tonne on Friday, down 40 percent so far this month and 57 percent from its record in July this year.

Many Chinese smelters are also struggling with low cash flow due to tight credit from banks and low prices of sulphuric acid, a by-product of copper smelting.

But Chinese prices of sulphuric acid have fallen to around 250 yuan a tonne from about 1,800 yuan in May, according to smelter sources.

London-based research group CRU expects that a third of the world's copper smelters could slip into the red in 2009 on low TC/RCs, falling metal prices and a slump in credits for by-products such as sulphuric acid.

If more Chinese smelters cut production, TC/RCs for term concentrate imports may rise to up to $50 a tonne and 5 U.S.cents a pound in 2009 versus this year's $47.2 and 4.72 cents, traders said.

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