China’s Xiangguang Copper to Restart After Getting Rescue Deal

(Bloomberg) -- Yanggu Xiangguang Copper Co., a major Chinese copper smelter idled for a month amid financial difficulties, is expected to restart production soon after clinching a rescue deal with state-owned trading house Xiamen C&D Inc.

The agreement will see C&D pay Xiangguang to process the trader’s copper concentrate into metal, according to people familiar with matter. This will help fund operating costs -- including salaries -- while Xiangguang pursues a debt restructuring with creditors including Chinese and foreign banks, said the people, who asked not to be identified as they weren’t authorized to comment publicly.

The smelter in Yanggu, Shandong province, has been idle since late March after creditors stopped providing loans, according to the people. Xiangguang’s troubles highlighted intense financial pressures roiling China’s private businesses even before the current Covid-19 wave hammered demand and piled pressure on the economy.  

Xiangguang held a combined liability of 11 billion yuan ($1.7 billion) as of September last year, and had already delayed payment of at least a total $71.6 million loans last month. 

The plant could resume operations as soon as next month or early June, the people said. It’s not clear how much of the facility’s 450,000-ton annual capacity for refined copper would be utilized by C&D. 

Xiangguang and C&D didn’t respond to emailed requests for comment.

Copper demand in top consumer China has been relatively weak this year, even as prices have advanced globally amid fears of a shortage. Investors are watching the Chinese government’s efforts to quash Covid outbreaks that have paralyzed Shanghai and spread to Beijing.

President Xi Jinping pledged an “all out” push for more infrastructure construction on Tuesday, in a bid to refire growth that’s been hammered by omicron’s spread. But commodities markets barely registered the remarks, with Shanghai copper futures rising only very slightly on Wednesday.

Xiamen C&D, headquartered in Fujian province and listed in Shanghai, is a state-controlled trader with revenue of 708 billion yuan and a net profit of 11 billion yuan last year, according to its website. The firm registered a company in Yanggu earlier this week with business scope including copper smelting, according to information available through Baidu Inc.’s search engine.

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With assistance from Bloomberg