Acid, not copper, is paying China's smelters but will it last?

Core Viewpoint - The surge in sulphuric acid prices, driven by supply disruptions, has significantly impacted China's copper smelters, shifting their profit reliance from traditional smelting fees to sulphuric acid sales, which may not be sustainable in the long term [1]. Industry Summary - Demand for sulphuric acid is increasing in the battery and mining sectors, tightening the market [1]. - Sulphuric acid prices have surged approximately 500% over the past 2.5 years, providing an estimated $1.5 billion boost to China's copper smelters last year as traditional smelting fees declined [1]. - The price of sulphuric acid reached about 1,045 yuan ($145) per metric ton in early January, compared to 464 yuan a year earlier [1]. - Sulphuric acid now accounts for over 64% of smelters' revenue from byproducts and other non-TC/RC sources, up from a historical 27% [1]. Company Summary - Yunnan Copper reported sulphuric acid sales of 790 million yuan ($114 million), which constituted about a quarter of its gross profit, despite acid contributing roughly 1% of revenue [1]. - Daye Nonferrous expressed concerns about the uncertain outlook for sulphuric acid prices, indicating a cautious approach among smelters regarding negative TC/RCs during contract negotiations [1]. - Analysts predict a potential decline in sulphuric acid prices by 10-30% in the coming months due to demand destruction from higher prices and new projects starting [1].