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The copper smelting industry is increasing pressure as plants around the world struggle to compete with the scores of new factories in China, providing cheap production of red metal.
Commodity trader Glencore announced last week that it would halt operations at the Pasar Smelter in the Philippines.
According to analysts at RBC, global copper smelters are struggling to compete with Chinese rivals, rapidly building a fleet of facilities and managing about half of their copper smelting capacity around the world.
Copper is required for electric vehicles, batteries, power cables, and various other industrial components that are essential for switching to a net zero economy.
And the industry is facing uncertainty due to tariff threats after President Donald Trump ordered an investigation into copper imports.
Copper dumping investigations allow the administration to impose measures including tariffs and allocations.
Traders warned that Pasar could be a series of smelters outside China that are forced to be shut down due to a recession caused by oversupply of capacity.
The fees smelters charge to convert copper ore into red metal had reached an all-time low in late February and have been consistently negative since December. That means the smelter is actually paying for the ore to process.
China’s tongueless nonferrous metal group reportedly plans to open two more copper smelters this year that could exacerbate excess supply.
Ivan Aliagada, chief executive of Chilean copper miner Antofagasta, told the Financial Times in February that he hopes that the conditions will remain “for a while.” “Some people see ways to reduce it… Utilizing their facilities,” he said.
One trader said in an echo of what happened in the nickel market where Western companies struggle to compete, that the harsh conditions likely mean “more ex-China closures.”
“The smelter margins are narrowed,” said Duncan Hobbs, an analyst at Trader Concord Resources. “These are really difficult times.”
“They (the fees) are the lowest they’ve fallen into living memories,” added Albert McKenzie of First Market, a price reporting agency.
Record low spot market fees have reached margins, but many smelters are increasing revenue from long-term copper ore contracts.
These contracts are agreed around benchmark prices. This is expected to exceed $20 per 20 tonnes this year, compared to $80 last year.
Smelters also make money from the by-products of copper processing, including other metals found in ores such as sulfuric acid and gold. Gold skyrocketed to reach a high this year.
Furthermore, many companies with smelters own copper mining or production operations, and even if they don’t make independent money, they still need facilities.
Analysts said closing the smelter would take a long time to get it back online, but it would be a last resort.
Considering how low prices are, if smelters can close their money and get it back, RBC Capital Markets analyst Ben Davis said.
