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China’s production caps and sustainability drive reshape the base metals market

by admin September 30, 2025
September 30, 2025
China’s production caps and sustainability drive reshape the base metals market

The global base metals market is bracing for significant shifts following a series of announcements from China, the world’s largest consumer of these raw materials. 

New production caps on non-ferrous metals and an increased emphasis on recycling are set to redefine supply dynamics, potentially offering price support while also introducing long-term uncertainties.

On Sunday, China’s Ministry of Industry and Information Technology revealed plans to limit the average annual production growth of 10 key non-ferrous metals, including copper and aluminum, to a mere 1.5% for this year and next.

This marks a drastic reduction from the approximately 5% growth seen over the past two years, and even higher for copper, which grew by over 5% in both 2023 and 2024.

Neil Welsh, head of metals at FCA-regulated multi-asset brokerage Britannia Global Markets, said:

Beijing is putting more weight on recycling, and the roadmap seeks to achieve breakthroughs in high-end products and help companies enhance global competitiveness.

Addressing overcapacity and promoting sustainability

This strategic move by Beijing is a two-pronged approach, primarily aimed at tackling the pervasive issue of overcapacity within Chinese industries, which has severely eroded profit margins. 

Beyond economic concerns, sustainability is playing an increasingly vital role in these policy decisions.

As stated by Thu Lan Nguyen, head of FX and commodities research at Commerzbank AG, “more emphasis is to be placed on secondary production, i.e., the recycling of raw materials.” 

This commitment to a circular economy was foreshadowed months ago when the Chinese government relaxed import restrictions on scrap materials to ensure a consistent supply for domestic industries.

However, the long-term impact of this shift remains to be seen as Nguyen noted:

In the long term, this could mean merely a shift from primary to secondary production, which might mitigate the price-supporting effect of slower growth in primary production. 

While initial price support is anticipated from reduced primary production, the eventual ramp-up of secondary production could offset some of those gains.

Mixed signals from PMI data

Adding to the nuanced picture, official Purchasing Managers’ Indices (PMIs) released early this morning indicate a stabilization of business sentiment in China, hovering near the neutral 50-point mark. 

While the manufacturing sector index saw a slight improvement, it remains just below 50, signaling a modest decline in activity. 

“The most important market for base metals is stagnating, which is likely to limit further upward potential for prices,” Nguyen added. 

This suggests that while supply-side constraints from the new production caps may offer some price support, sluggish demand in the key Chinese market could temper any significant rallies.

Tin prices surge amid Indonesian mine closures

In a separate development, tin prices witnessed a substantial 3% climb yesterday, reaching a six-month high. 

This surge is attributed to reports that the Indonesian president has ordered the closure of up to 1,000 illegal mines. 

Indonesia, a significant player in the global tin market, experienced a slump in production to a 20-year low last year due to stricter regulatory controls, according to ITRI, the International Tin Association. 

Exports had subsequently fallen sharply, though they had recovered significantly this year.

The immediate impact of these closures on global supply remains a point of speculation. 

Barbara Lambrecht, commodity analyst at Commerzbank, said:

The extent to which there will actually be significant supply shortages remains to be seen. 

Last year, Indonesia accounted for a considerable 16% of global tin production, according to the USGS, indicating that any sustained disruption could have a noticeable effect on international markets. 

The tin market will be closely watching for further developments on this front as the new week unfolds.

The post China’s production caps and sustainability drive reshape the base metals market appeared first on Invezz

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