China tightens requirements for new copper smelters to curb expansion

As China implements these regulations, the copper market will undergo a period of adjustment, requiring producers and traders to adapt to new supply and demand dynamics.

China has announced new restrictions on the construction of copper smelters, aiming to control capacity expansion in the world's largest producer of refined copper. According to the 2025-2027 copper industry development plan issued by 11 ministries, companies seeking to build new smelters must secure sufficient mine supply, either through direct ownership or equity stakes in mines.

Restrictions limiting industry expansion

This new requirement can only be met by a limited number of major Chinese companies, potentially slowing down the proliferation of new smelters. The measure responds to intense competition for raw materials, as mines worldwide face production disruptions, declining ore grades, and rising exploration costs.

As a result, spot processing fees have plunged below zero, causing industry-wide losses and threatening production cuts at Chinese plants. In response, the China Nonferrous Metals Industry Association urged in October 2023 to make restrictions on new smelters a "top priority," following the government's intervention in the steel and aluminum industries.

Dependence on imports and supply strategies

Currently, approximately 85% of the concentrate used in Chinese plants is imported, according to data from the US Geological Survey (USGS). In 2023, China produced 12 million tons of refined copper, while its mined output was only 1.7 million tons. The country's total copper reserves were estimated at 41 million tons, accounting for 4.1% of the global total.

To reduce its dependence on imports and secure raw material supply, the Chinese government aims to increase its domestic copper mine resources by 5% to 10% over the next three years. Additionally, the plan outlines that China will promote long-term purchase agreements with international miners, increase imports of blister and anode copper, and encourage the import of scrap copper as an alternative supply source.

Global impact of the measures

China's new restrictions could significantly impact the global copper market. The slowdown in new smelter construction may limit the country's refining capacity and affect the worldwide supply of refined copper. Furthermore, the push for long-term agreements with foreign miners and the increased demand for scrap copper could alter global trade flows of the red metal.