Large China copper smelters agree to cut production 5 percent in 2016

Nine large copper producers in China have agreed to cut refined metal production by more than 200,000 tonnes in 2016 or around 5 percent from this year's level, an executive at one of the producers said on Saturday. The nine producers also will ask the state-controlled industry body, China Nonferrous Metals Industry Association (CNIA) to request Beijing to investigate high-speed trading and malicious short selling of copper contracts traded on the Shanghai Futures Exchange, he said.
The agreement followed a meeting by the producers on Saturday morning in Shanghai to discuss co-ordinated output cuts to support the market after prices in Shanghai and the London Metal Exchange plunged to their lowest in more than 6 years. Zinc smelters and nickel smelters also called for production cuts earlier this week.
The executive spoke on condition that he not be identified. The nine producers are members of China Smelters Purchase Team (CSPT) and include Jiangxi Copper Company Ltd and Tongling Nonferrous Metals Group. Their production accounted with about 60 percent of China's refined copper production in the first 10 months of this year. "We prepare to cut production by at least 200,000 tonnes," the executive told Reuters, adding that the cut could be expanded if copper prices fell further.
The companies will produce about 4.4-4.5 million tonnes of refined copper this year, he added. The proposed cut is equal to about a third of China's production in October. The producers would mainly cut output that uses scrap as feedstock, the executive said. The firms also use copper concentrates as feedstock.
The copper smelters, whose production is mostly registered for the delivery of the copper contract in Shanghai would restrict sales of their metal to players that hold massive short positions, the executive also said. "We want those short sellers know that if they do too much, we would make them feeling not comfortable (as they would find it difficult to get copper for deliveries)," he said. CNIA, supported by some large metals producers, has already called for a short-selling probe on metals futures, sources said earlier this week.