Pressure is mounting on Chinese copper production smelters to control growth that is hurting the profitability of the sector. There may be a risk to the survival of plants worldwide.

After a flurry of smelter development to ensure supplies essential to the energy transition, the world's largest consumer of copper is on course to generate about half of the world's refined metal this year. Despite fierce competition for limited raw resources that is destroying margins everywhere, the capacity boom has persisted.

According to Grant Sporre, head of metals and mining analysis at Bloomberg Intelligence, China's excesses pose a danger to the future of copper refining outside of its borders. He warned that operations from Chile to Europe and India may be in jeopardy.

The nation has yet to respond to growing requests to reduce production and pull back the massive pipeline of new facilities. Even as western governments worry about China's hold on key minerals, more output will be concentrated in China if the rapid increase persists and pushes reductions elsewhere in the globe.

When smelters confront crucial negotiations on the ore supply contracts that dictate their margins this week in Shanghai, the crisis will reach a climax at Asia's largest copper industry conference. Because capacity is so far ahead of mine production worldwide, miners have the upper hand in the yearly discussions.

According to industry projections, the treatment and refining costs paid to smelters to turn ore into metal might decrease from $80 per ton in 2024 to $40 per ton or less for the following year. Widespread damages might result from such a settlement. According to metals consultant CRU Group, which has data dating back to 1992, the previous low was $43 per ton in 2004.

In the upcoming decades, demand from grid infrastructure, electric cars, and renewable energy sources is expected to soar. More investment is being made in the global copper supply chain as a result, although building smelters is quicker and less expensive than building new mines.

In Indonesia, where the government intends to stop exporting ore that currently feeds smelters across Asia, and India, which is looking to lessen its dependency on imports, the construction of new plants has made the ore shortage worse.