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China will introduce a raft of economic and legal measures to curb blind investment in the copper smelting industry, the National Development and Reform Commission said in Beijing yesterday.
Jia Yinsong, deputy director of the commission's Bureau of Economic Operations, said the measures included taxation and credit control.
These measures are similar to those introduced in the aluminium sector.
They are aimed at promoting sustainable and healthy development of the country's copper smelting industry.
China's fast economic development, especially the expansion of the power industry, has fuelled the demand for copper, Jia said.
China produced 2.17 million tons of electrolytic copper last year. But it used 4.5 million tons.
The country had to import copper to meet this surging demand.
A short supply of copper also resulted in price rises and increased company profits.
In 2003, the average copper price stood at US$1,779 per ton. But it rose to US$2,865 per ton last year and US$3,328 per ton during the first half of this year.
Early this month, copper futures jumped up to record highs of 38,030 yuan (US$4,689) per ton at the Shanghai futures exchange.
Major copper users, including many telecommunication manufacturers, are rushing to hedge against further price hikes.
Because of high domestic demand for the metal, the Shanghai exchange has gained greater influence in setting prices on the global market.
Analysts believe the Shanghai price is likely to continue rising until it reaches some sort of parity with the London futures market, which has been ahead of Shanghai in terms of prices.
The soaring prices increased profits and so stimulated domestic firms' enthusiasm to expand production capacity, Jia said.
A preliminary investigation found that there were 18 copper smelting projects in China under construction or planned.
The combined production capacity of these projects would be 2.05 million tons a year, 1.3 times the level set at the end of last year.
Under the current trend, the country's copper production capacity will reach 3.7 million tons by the end of 2007, Jia said.
But blind investment in smelting will not only result in supply problems, but will also put pressure on the environment and energy supplies, he said.
China's proven copper reserves only account for 5.5 percent of the world's total.
And a majority of the reserves are in remote areas where transportation links are not developed.
The current copper ore supply can only meet 40 percent of smelting capacity.
Also, more copper smelters will consume more energy and cause serious pollution, Jia said.
The government will regulate copper smelters' production, improve their performance and close those firms with backward technology, he said.
The government will also speed up a development plan for the copper industry, he said.
Zhang Fang, an analyst with Beijing-based China Securities, said the government's macro-control measures would not have a major negative impact on existing copper smelters.
"They are mainly targeting new projects with small production capacity," she said.
The measures would not increase existing firms' production costs, nor reduce their profits, she said.
(China Daily October 27, 2005)
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