London 01/12/2015 - Ten Chinese copper smelters have agreed to cut copper cathode output by a combined 350,000 tonnes in 2016, they said.
"350,000 tonnes is a lot, so we should see copper prices respond by moving higher quite quickly," a trader in Shanghai said.
The cuts represents 3.5 percent of the total consumption for copper cathodes in China, which is estimated at 10 million tonnes in 2015.
On the London Metal Exchange (LME), copper benchmark prices were last at $4,617 per tonne, up from $4,586 per tonne on Monday's close while on the Shanghai Futures Exchange, January copper contracts ended at 35,150 yuan per tonne, down 270 from yesterday's close.
"They are just trying to push the price up. It's not going to make a big difference for China or the world - it's less than 30,000 tonnes per month" another Shanghai-based trader said. "It's not even sure that smelters will really cut production, especially if annual TC/RCs conclude above $90 as they still make money at that price. China will also continue to import large quantities of metal," said a second trading source in Shanghai.
The move - intended to prop up an ailing market in which prices no longer reflect accurately supply and demand - follows cuts from Chinese zinc and nickel producers in response to low-price environment.
"Copper is a scarce resource in China and prices have deviated from the fundamentals," the smelters said in a statement on Tuesday.
As well as cutting output, the participating smelters - Jiangxi Copper, Tongling Nonferrous Metals, Yunnan Copper, Jinchuan Group, Daye Nonferrous Metals, Zhongtiaoshan Nonferrous Metals Group, Bayin Nonferrous Group, Yantai Guorun Copper, China Gold and Yanggu Xiangguang Copper - will also suspend operations at outdated production lines for upgrades.
"In the short term, we will stop the capacities that are already operating at a loss while in the medium/long-run we will not expand our capacities in the coming years," they said.
They also called on the government to clamp down new smelting capacity coming online, to provide better support for established smelters and for mergers and acquisitions and to encourage "more participation from social capital", they added.
The smelters will also hold meetings twice a month to exchange information and to take proactive measures according to market conditions.
They also recommend that Chinese authorities monitor and restrict high-frequency trading to maintain a fair playing field in China and called on Beijing to purchase surplus copper.
(Additional reporting by Perrine Faye, edited by Mark Shaw)