China will produce 10 percent more copper next year, but it must import more raw materials to maintain growth and fill around a third of its refined copper needs, a leading state-owned analyst said.
China's expanding smelters would benefit from greater availability of copper concentrate in the global market and higher processing fees next year, which would make up for a shortage of domestic resources, said Yang Changhua, senior analyst at Beijing Antaike Information Development Co Ltd.
"The raw material deficit needs to be resolved by importing," Yang said in a paper prepared for the 2004 China International Copper Forum in Haikou, on Hainan island.
China is boosting copper production to feed an economy that consumed around a fifth of the world's supply of the metal as it expanded 9.1 percent in the year through the third quarter.
Yang said China would produce 2.2 million tonnes of copper in 2005, enough to meet almost two-thirds of its consumption.
Heavy investment in the country's power sector, a major consumer of copper, would ensure steady growth in demand for the metal, even if Beijing's macro-economic controls were to cool the rate of economic growth, Yang said.
He added China's refined copper demand would grow 9.4 percent next year to 3.5 million tonnes. Net imports would total 1.3 million tonnes, from around 1.1 million in 2004.
China's copper mines would also raise output by 10 percent this year. But even if large operations such as the Asele mine in the Xinjiang autonomous region and Tongling Nonferrous Metals Group's Dongguashan mine were to run at full capacity, they would be unable to meet increasing demand in China, Yang said.
"Raw material supply is still a bottleneck for refined copper production in China," he said.
But world supply of copper concentrate would continue growing in 2005 after picking up in the second half of this year, Yang said.
Two of the world's three largest copper mines, BHP Billiton's Escondida in Chile and Freeport McMoRan Copper and Gold Inc's Grasberg unit in Indonesia, have restarted full output following disruptions.
The continued strength of copper prices, which topped $3,000 a tonne in March and spiked again to a near-16-year peak of $3,175 earlier this month, had also persuaded companies including US-based Phelps Dodge Corp to restart idled mine capacity.
"It needs some time for the mine production increase to be transferred to refined copper production," Yang said. "Therefore, copper is still in deficit. But the deficit in the second half of 2004 is much lower than in the first half."
Greater availability of copper concentrate worldwide has allowed smelters to command higher fees, or treatment and refining charges, for processing the raw material into metal.
Yang said Chinese smelters settled spot TC/RCs on imported concentrate at $120 a tonne/$12 a pound last month, the highest level since 1997 and a six-fold increase from early this year.
"We estimate that TC/RCs are likely to rise further," he said.