US-China tensions are boosting the prospects of a Mexican copper smelter project proposed by Southern Copper Corp.

As the US seeks to reduce supply-chain reliance on geopolitical rivals and source imports closer to home, more finished copper could be absorbed by manufacturers in Mexico, Southern Copper Chief Financial Officer Raul Jacob said in an interview Tuesday.

Right now the company’s mines in Mexico produce more semi-processed copper, known as concentrate, than its plants can handle, with the remainder shipped to smelters offshore. It’s considering spending $1 billion-plus on a new smelter in Empalme, Sonora state. 

“The market for buying concentrate in this environment will be favorable because you will have some different ways to get refined copper other than sending it to China,” Jacob said.

US-China tensions are redrawing global trade — including markets for metals that are key in the shift away from fossil fuels — with Mexico recently overtaking China as the top supplier of goods to the US.

Southern Copper is considering a similar-sized smelting investment in Peru to service its mines there, identifying Japanese technology that is more efficient than its current operations.

Still, pulling the trigger on the smelter projects requires greater clarity in the company’s mining-expansion plans as it looks to ramp up copper output from 932,000 metric tons this year to about 1.6 million tons by 2032. The new smelters are estimated to begin operating in 2029, each with a capacity of 1 millions tons.

Mineral-rich countries from Indonesia to Chile are looking to grow their processing capacity in a bid to reduce dependence on Chinese smelters and the waste involved in exporting concentrates. But the real bottleneck in copper — as electrification boosts demand — is expected to be at mines rather than processing. 

Still, Southern Copper’s existing plants are getting good returns and selling more refined metal directly to manufacturers has strategic benefits, Jacob said. “When you sell concentrate, you have the smelters and the traders and they are not necessarily the best.”