Higher global prices prompted profit-driven Chinese copper smelters to produce more metal in the January-February period despite the weeklong Lunar New Year holiday resulting in a slight on-month decline in February output.

Continued growth in copper production indicated Chinese smelters' expectations of higher copper prices in the first half of the year, underpinned by firm domestic demand and the prospect of tight concentrate supply worldwide.

China's February copper output rose 3.8% on year to 386,000 metric tons, a decline of 5.6% from January's 409,000 tons, the National Bureau of Statistics said Friday.

Total output in the January-February period rose 7.9% to 795,000 tons.

"It is a quite self-explanatory thing--the higher copper prices are, the more smelters are going to produce, especially for those who don't have their own mines," said a Beijing-based analyst with a major international brokerage.

Three-month copper on the London Metal Exchange gained 3% during the January-February period, with the metal reaching its record high of $10,190/ton on Feb. 15, although the red metal recently underwent a correction due to concerns that political unrest in the Middle East could continue to push oil prices higher, which could eventually crimp global economic growth and reduce demand for metals and other commodities.

Analysts also attributed the ongoing production growth to higher treatment and refining charges or TC/RCs, fees paid by miners to smelters for processing concentrate into refined product.

Early January, Chinese copper smelters secured a big increase in 2011 term TC/RCs with global major miners on the back of sufficient concentrate inventories and higher spot processing fees.

Jiangxi Copper and Tonglin Nonferrous Metals separately sealed concentrate supply deals with BHP Billiton Ltd. (BHP) at levels above $70/ton and 7 cents a pound under a half-year contract.

Freeport-McMoRan Copper & Gold Inc. (FCX) offered an annual contract at $56.5/ton and 5.65 cents/lb, or an increase of 22% from 2010 benchmark TC/RCs, according to a person familiar with the situation.

The Beijing-based analyst said current TC/RCs around $75/ton and 7.5 cents/lb, while lower compared with $90/ton and 9 cents/lb in December, are lucrative enough for smelters to keep manufacturing.

China's copper production is expected to rise 7.7% on year to 4.9 million tons this year, according to projections from Beijing Antaike, the state-owned metals consultancy.

-Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com
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