When Ukrainian drone strikes hit Russia’s Astrakhan gas processing plant last September, Chinese copper smelters unexpectedly gained a financial windfall.
Astrakhan was a major producer of sulphur — the key raw material used to produce sulphuric acid, widely consumed in mining, fertilisers, and battery supply chains. After Russia halted sulphur exports, sulphuric acid prices in China nearly doubled by year-end, extending a rally that has seen prices surge about 500% over the past two and a half years.
The spike has reshaped the economics of China’s smelting industry.
Smelters typically earn money through treatment and refining charges (TC/RCs) for processing copper concentrate. However, oversupply of smelting capacity and tight concentrate availability pushed benchmark TC/RCs below zero in late 2024, hitting a record low of minus $49 per tonne in January.
By contrast, sulphuric acid prices climbed to around 1,045 yuan per metric ton in early January, up sharply from 464 yuan a year earlier. Analysts estimate the rally delivered roughly $1.5 billion in additional profits to Chinese smelters last year.
At Yunnan Copper, sulphuric acid sales generated 790 million yuan ($114 million), accounting for about a quarter of gross profit despite representing just 1% of revenue.
The boom, however, carries risks. Analysts warn that smelters are increasingly reliant on a volatile byproduct market that is unrelated to copper fundamentals. With forecasts pointing to a potential 10–30% price decline as new supply comes online and demand cools, the recent windfall may prove temporary.
For now, a byproduct has become the industry’s main profit engine — but its durability remains uncertain.
Frequently Asked Questions
Why did sulphuric acid prices surge so sharply?
Prices spiked after Ukrainian drone strikes disrupted sulphur production at Russia’s Astrakhan gas processing plant, tightening global supply. Russia halted sulphur exports, while China — which relies on imports for about 40% of its sulphur — felt the impact quickly. At the same time, demand from fertilisers and battery-related industries remained strong
How did this benefit Chinese copper smelters?
Sulphuric acid is a byproduct of copper smelting. As prices jumped nearly 500% over the past two and a half years, smelters earned an estimated $1.5 billion in additional profits last year — offsetting weak core smelting margins caused by collapsing treatment and refining charges (TC/RCs)
Why are core smelting profits under pressure?
China expanded smelting capacity aggressively, increasing competition for limited copper concentrate supply. As a result, benchmark TC/RCs fell below zero in late 2024, meaning smelters were effectively paying to process concentrate under some contracts.
How significant is sulphuric acid revenue now?
At Yunnan Copper, acid sales accounted for roughly 25% of gross profit despite contributing only about 1% of total revenue. Industry-wide, sulphuric acid now makes up over 60% of byproduct income for many smelters.
What are the risks going forward?
Analysts expect sulphuric acid prices to fall 10–30% as new supply enters the market and high prices dampen demand. If acid prices retreat while TC/RCs remain weak, smelters’ margins could shrink quickly — exposing their growing dependence on a volatile byproduct market.
