Banking on increased demand from the government stimulus package, Jiangxi Copper, China's second-largest smelter, predicted that consumption for refined copper products will grow by 2 percent this year.

Wang Chiwei, Jiangxi Copper's executive director, said at an industry conference yesterday that 2008 refined copper output would rise 6.7 percent to 3.68 million tons and copper concentrate production would rise 8.4 percent to 920,000 tons.

Wang said China's copper smelters who use primary material as an input will run at full capacity in 2009.

He didn't elaborate. But commodity analysts said higher processing fees offered by foreign smelters would encourage production and ease the squeeze on Jiangxi Copper's profit margins by rising costs and bloating inventory.

Freeport-McMoRan Copper & Gold Inc, the world's top producer of copper and gold, agreed this month to pay about 60 percent higher processing fees, at US$75 a metric ton, to the Jiangxi-based company in 2009.

Global copper prices have plunged by more than 50 percent from a record US$8,940 a ton in July as the global economic downturn took its toll on consumption of the metal.

The lowered price has made Chinese smelters, including Tongling Nonferrous Metals Group, the country's biggest copper smelter, trim costs by cutting output.

Liu Boyang, a metal specialist at Taifook Securities, said Jiangxi Copper's prediction is more optimistic than theirs.

"Jiangxi Copper will have difficulties having its performance, in terms of sale volume and value, to return to the early 2008 level," he said. Unlike iron and steel, the demand for copper does not necessarily increase in line with the economy, he said.

Jiangxi Copper has said that first-half earnings in 2008 rose 32 percent from a year earlier because of higher product prices, but it warned that weakening copper consumption would erode the gains in the second half.

The priority of most Chinese metal companies is to clear their stockpiles, which are depressing market prices of a wide range of metal products. Stockpiles of copper in Shanghai warehouses fell 30 percent, the biggest fall in almost a year, to 15,871 tons last week.

Jiangxi Copper's shares yesterday closed at HK$5.84 apiece, up 3.55 percent from Friday's close.

(China Daily January 20, 2009)