By Tom Daly
BEIJING (Reuters) - Factory closures due to the coronavirus outbreak in China, including in epicentre Hubei, are sapping demand for sulphuric acid, a byproduct of copper production, and will likely see smelters cut output, industry sources said on Tuesday.
Prices for sulphuric acid, mostly used in fertilisers, have more than halved since December's outbreak, which has now claimed more than 400 lives in China and sparked concerns over the impact on copper demand in the world's biggest consumer of the metal.
Hubei, which accounts for 20% of China's sulphuric acid consumption, according to an official at Hubei-based smelter Daye Nonferrous Metals Group, has told businesses not to return to work until at least Feb. 14, while other Chinese regions have extended the Lunar New Year holiday through this week.
"As a result, there is huge pressure on the sulphuric acid sales of copper smelters" and their copper production will be affected, the Daye Nonferrous source said, adding that there would be a knock-on effect on China's copper concentrate imports and treatment and refining charges (TC/RCs).
Copper smelters produce around one tonne of sulphuric acid for every tonne of copper concentrate consumed.
Transport restrictions around Hubei are having a small impact on Daye's own inbound concentrate shipments, the source said, adding that Daye itself has not yet cut output.
But if weak acid sales persist for another month or two, the 600,000 tonnes per year smelter may have to run at only 70-80% of capacity, said the source, who declined to be identified due to the sensitivity of the matter.
"High acid stock could impact cathode production," said He Tianyu, a copper analyst with CRU, adding that logistics were a "big problem" for China's copper industry at the moment.
A source at Jiangxi Copper Co, with annual smelting capacity of more than 1 million tonnes, said the company may also be affected.
"We had nearly full capacity running during Chinese New Year but might need to cut ... due to the high inventory of sulphuric acid," the source said, declining to be identified as he is not authorised to speak to the media.
One-third of Jiangxi Copper's refined copper output that uses copper concentrate, or partially processed copper ore, as a raw material, may be cut, while production using blister, a partially purified form of copper, will stay the same, he added.
Daye Nonferrous and Jiangxi Copper did not immediately respond to requests for comment.
(Reporting by Tom Daly; Editing by Kirsten Donovan)