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Jiangxi Copper to up capital spend on demand boost

By Lillian Liu and Joey Kwok (China Daily)
Updated: 2009-04-02 08:07

Jiangxi Copper Co, China's largest copper producer by output, yesterday said it expects demand for the metal to recover in the second quarter this year, following a challenging first quarter.

Based on its price projection, the company will increase capital spending to 4.4 billion yuan this year, from 4.1 billion yuan in 2008, to boost production capacity, Li Yihuang, chairman of Jiangxi Copper, told reporters at a press conference in Hong Kong.

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The company posted a 49.6-percent fall in net profit last year as metal prices tumbled on weak market demand, while costs, including energy and other resource surged. Net income was 2.29 billion yuan in 2008 compared to 4.53 billion yuan in the previous year.

Copper smelters worldwide were forced last year to cut their product prices following excess smelting output and a tight supply of concentrates, which lower copper treatment and refining charges. Chinese copper producers had agreed to cut these charges.

Li said the company faced several challenges in first-quarter sales.

"Together with the dissatisfying sales in sulfuric acid and the difficulties in the purchase of raw materials, the company is facing a relatively more difficult period in over a decade," he said.

He hoped the economy on the mainland would become better in the second quarter, which might help revive the copper industry.

The production of copper might reach 800,000 tons this year, a slight rise from 700,000 tons in 2008. Li expected copper prices to remain at 32,000 yuan per ton this year.

The company upgraded production capacity of copper cathode last year to over 800,000 tons per annum. By-products like gold, silver and sulfuric acid also saw increases in output, the company said.

The soaring price of fuel in the middle of last year affected Jiangxi Copper, which was forced to cut output of semi-finished products by up to 30 percent in August.

Executive director and deputy general manager Wang Chiwei said the company has engaged in raw materials hedging to avoid the impact of market fluctuation on the sale of copper.

"The hedge (of copper spot and futures) will not be loss-making if the contract is carried out in full," Wang said.

Li expected the company's projects in Peru and Afghanistan to contribute 140,000 tons and 200,000 tons, respectively, to the group's total turnover in the coming years.

Against the 0.42 percent slump in the benchmark Hang Seng Index, shares in Jiangxi Copper rose 1.49 percent, or HK$0.12, to end at HK$8.2 on the Hong Kong stock exchange yesterday.