① Production cuts of “no more than 100,000 tons” were beyond the industry's expectations. ② The old equipment of Southwest Copper will be discontinued in an orderly manner starting December 30, 2023.
Financial Services Association, December 29 (Reporter Liang Xiangcai) After a lapse of one year, the progress of the relocation project for the Southwest Copper Industry, the largest smelter under Yunnan Copper (000878.SZ), was finally visible, but production cuts of “no more than 100,000 tons” were unexpected for the industry.
Some industry insiders told the Financial Federation reporter that previously, the industry generally estimated that the relocation of the Southwest Copper Industry would not cut production much, but judging from the current likely reduction of about 100,000 tons, the market's previous supply and demand balance expectations for South China Electric Copper will also need to be adjusted accordingly.
This evening, Yunnan Copper announced that it is in the process of relocating and upgrading the Southwest Copper Industry. According to progress requirements, “the old installation will be discontinued in an orderly manner starting December 30, 2023.”
However, at this point, the construction of the new factory area that Southwest Copper will move to is just over halfway. According to the company's announcement, up to now, the overall progress of the new Southwest Copper plant project has been completed. The steel structure and furnace installation of the fire method plant are being implemented. The electrolysis plant has been capped, and sub-projects such as oxygen generation, acid production, and power supply are progressing normally. The preliminary plans are that the electrolysis system will be completed and put into operation in May 2024, and the fire system will be put into operation in August.
Under the current situation where the new and old production capacity of the Southwest Copper Industry is “out of touch”, it is inevitable that it will drag down the production volume of the company's smelting side.
According to the company's announcement, the relocation of Southwest Copper will not affect the company's overall production and operation plan, but it will have a certain impact on the company's operating performance. According to preliminary estimates, based on the company's budget output of 1.28 million tons of cathode copper in 2023, the impact of the relocation of Southwest Copper on the company's total output of cathode copper in 2024 is expected to be no more than 100,000 tons. The specific accounting treatment and impact on the company's profit is ultimately based on the amount confirmed by the accounting firm's audit.
According to Yunnan Copper's 2022 financial report, the company's three major smelters are Southwest Copper, Chifeng Yuntong, and Southeast Copper. Among them, Southwest Copper has the largest production capacity among the company's three smelters, contributing more than half of the equity cathode copper production in 2020-2022.
Yunnan copper smelting enterprise cathode copper production table (screenshot source: 2022 financial report of the company)
According to the company's announcement, Southwest Copper's relocation project is an important measure to respond to the country's “double carbon” requirements and promote the optimization and upgrading of the smelting end. After completion, it will have an annual production capacity of 550,000 tons of cathode copper, 1.4 million tons of sulfuric acid, 11.28 tons of gold ingots, and 650 tons of silver ingots, while also producing other related by-products. The construction period of the project is about 23 months. The total investment is approximately 6424 billion yuan. After the project is completed and put into operation, it is expected to achieve sales revenue of 31.38 billion yuan/year.