The West is Staring at a Looming Crisis in Metals Smelting

In recent years, China has imposed some restrictions on the export of rare earth metals like yttrium, samarium, lutetium, gadolinium, dysprosium, terbium, and scandium. The East Asian country has also become a global leader in base metals smelting, particularly for copper, steel, and aluminum. 

While technically impressive, China’s rapid smelting expansion has flooded the global market, driving down processing fees and profits and pushing many Western smelters to the brink. 

Chinese smelters recently entered a copper supply deal with Antofagasta that included zero conversion fees, an unprecedented move that shows smelters are now paying miners for ore, eliminating their primary source of revenue. 

Historically, processing fees are the primary income source for smelters, with the sale of by-products like gold and sulfuric acid also generating some income. With smelters now paying miners to access the limited ore in supply, the business has become unsustainable with some struggling to stay profitable. 

This may explain why copper smelters in the Philippines and Namibia were recently shut down temporarily, with others like the Tomago aluminum smelter in Australia expected to follow suit in the near future. Glencore has also raised concerns over the financial viability of its Mount Isa copper smelter following the shutdown of related mining operations. 

Similar to copper, zinc smelters are also losing money despite the production of ore rising by 5.1% between January and April of this year. 

Between 2007 and 2024, China has seen its production of refined zinc rise to 50%. Globally, the country’s aluminum output adds up to about 60%, with excess aluminum being exported as semi-manufactured products. Between 2010 and 2024, aluminum exports rose from 2 million tons to 6 million tons. 

It is expected that China’s firm grip on the global industrial metals market will strengthen as more Western smelters collapse under profit pressure. 

It helps that major players in China are vertically integrated, which allows them to offset losses along their production chain. The country’s provincial and central governments also offer subsidies to plants making losses, which puts Western competitors at a disadvantage.  

Furthermore, Western smelters must contend with high electricity costs and intense competition for energy from the increasingly power-intensive tech sector. If this trend continues, Western economies risk losing control over critical parts of the industrial metals supply chain.  

This could create vulnerabilities in sectors ranging from electric vehicle manufacturing to national defense, especially since metals like aluminum and copper are essential for the global energy transition. 

As exploration companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) uncover more potential sources of vital minerals like copper within North America, serious thought needs to be directed at how these resources can be processed cost-effectively within the region so that the looming smelting crisis is averted. 

NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF 

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