By-products support 2011 profits for copper smelters
Shanghai. March 28. INTERFAX-CHINA - Annual results from two major state-owned Chinese copper smelters released Wednesday reveal that by-products of the smelting process, such as precious metals and sulphuric acid, are making an increasing contribution to profits at a time when margins from copper sales are thin.
China's largest copper smelter, Jiangxi Copper Co. Ltd., saw profit rise 33.47 percent from 2010 to RMB 6.55 billion ($1.04 billion), while revenue was up 53.9 percent at RMB 117.64 billion ($18.7 billion).
Though refined copper revenue grew 68.55 percent on the back of higher prices and sales volumes, profit margins on the metal fell to 5.86 percent from 7.37 percent last year due to increases in raw material purchases and production costs along with unstable prices, said the firm.
Copper products are in the same boat, with margins on copper rods dropping 1.23 percentage points from last year and margins on other products witnessing a 2.24 percentage point decline.
The company is currently expanding its smelting capacity, which will lead to higher copper concentrate purchases, further raising costs and increasing pressure on profits, noted Antaike analyst He Xiaohui.
Meanwhile, healthy markets for by-products mean margins on these are moving in the opposite direction, rising 0.81 percentage points from last year for precious metals and 1.26 percentage points for sulfuric acid.
Yunnan Copper Co. Ltd. reported a similar trend, with net profit rising 31.68 percent to RMB 622 million ($98.87 million) during the period and revenue up 9.67 percent at RMB 35.24 billion ($5.6 billion).
Last year's gold bull market saw spot prices average $1,571.5 per ounce during the period, up 28.3 percent from 2010 compared to a compound annual growth rate of 19.4 percent in the last ten years. Silver prices meanwhile averaged an all-time high of $35.12 per ounce in 2011, up 74 percent year-on-year.
Though real demand for copper remains weak and the outlook for precious metals prices is also uncertain, the analyst nonetheless expects stable performances from major Chinese copper smelters this year: "While copper prices are currently jittery, they remain elevated and smelters can ensure income by enlarging output," said He.
Yunnan Copper expects copper prices to continue to fluctuate in a similar range as in 2011.
- KHM