The collapse in copper prices since July has forced more than 40 percent of China's refined copper capacity to slow production, and may cost the market as much as 120,000 tonnes in lost metal in 2008.
About 2 million tonnes of China's 4.6 million tonnes of refined copper capacity are reducing production rates and cuts may continue through the first quarter of next year, smelter officials said on Tuesday.
The cutbacks started in the third quarter, according to London-based research group CRU, and is equivalent to 3 percent of production from the world's biggest copper market or more than one month's China's imports of refined metal.
Shi Lin, Shanghai-based copper consultant for CRU, said cutbacks could reduce output in 2008 to 3.78 million tonnes from its previously expected 3.9 million tonnes.
State-owned research group Antaike said in the fourth quarter alone, low prices could reduce output by 70,000 tonnes.
The reduction by the producer of about a fifth of the world's refined copper may not reverse the price downtrend, but could cushion prices from falling deeper, Judy Zhu, Shanghai-based commodity analyst at Standard Chartered Bank, said.
"The cut could help consolidate prices," she said. "But, if Chinese consumption and the global economic situation do not turn around, such support to prices would be temporary."
Spot copper prices in China have lost 39 percent since late September trading around 35,000 yuan ($5,119) a tonne on Monday on weak domestic demand and low international prices MCU3, which, at $4,055, are down by more than a half from July's record high.
"Why should we produce more? It is a loss-making business," a senior official at Ningbo Jintian's copper smelter said.
Jintian was producing about 1,000 tonnes of refined copper a month versus capacity of about 16,000 tonnes, he said.
And the cuts are not confined to smaller producers. Tongling Nonferrous, the country's second-largest copper producer, said last week it was cutting production.
Yunnan Copper, the third largest, would produce 380,000 tonnes of refined copper this year, about two-thirds of its capacity, company sources said.
Falling metal prices have also reduced supply of scrap in China as suppliers are unwilling to sell stocks, smelter officials said.
"Supply of blister and scrap started falling in October," a manager at Yantai Penghui Copper's trading department said.
He added the firm was cutting production by 25 percent at its 100,000-tonne-a-year plant, which uses scrap and blister, the semi-smelted material for refined copper production, as feed.
An official at Fuchuanjiang Smelting Company said Chinese smelters were also limiting production in light of the volatility of copper prices.
The firm had capacity to produce 120,000 tonnes of refined copper a year and was cutting a third of the production, he said.
But Jiangxi, the top Chinese copper producer and the owner of China's biggest open-pit copper mine, is operating the full 700,000 tonnes of refining capacity, company secretary Pan Qifang said.
Zhu at Standard Charterer believes production costs to big producers like Jiangxi Copper might still be below current copper prices and they were not in a hurry to reduce production massively.
Smaller producers are considering extending reductions next year as demand falls and prices stay low.
Daye Nonferrous, the country's fifth-largest copper producer, will reduce refined copper production by 10 percent from this month to use up stocks of material and it may deepen cuts next year, a manager at its trade department said.
"Next year, we will reduce more production," he said.
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