"Rising Premiums on Secondary Copper Rod Boost Copper Cathode Demand Amid Supply Tightness"

Since March 4, 2026, secondary copper rod has shifted to a premium of 200-400 yuan/mt against the most-traded futures contract. Meanwhile, the price difference between copper cathode rod and secondary copper rod narrowed sharply from around 1,200 yuan/mt to about 300 yuan/mt, causing secondary copper rod to largely lose its previous economic substitution advantage. Under such circumstances, many end-users, including wire and cable enterprises, were forced to shift to purchasing copper cathode rod, thereby indirectly boosting consumption demand for copper cathode.

Recently, secondary copper rod prices continued to strengthen, mainly driven by two factors. First, raw material costs rose significantly. Since the standardized adjustment of local industrial support policies in H2 last year, secondary copper rod enterprises have become more cautious about expectations for subsequent local fiscal and tax arrangements. As specific implementation details remained unclear, most enterprises chose to stay shut after the 2026 Chinese New Year and wait on the sidelines, while a small number of enterprises that resumed production shifted to purchasing imported or China tax-included copper scrap in order to control potential tax compliance costs. This led to a concentrated release of demand for such raw materials, a step-by-step rise in invoice tax rates, and ultimately pushed up overall procurement costs for tax-included raw materials. Second, supply side, recovery was slow. Affected by uncertainty over fiscal and tax policies and concerns over compliant operations, enterprises generally showed low willingness to resume production, with limited raw material procurement scale. The industry's operating rate was significantly lower than the same period in previous years, resulting in a marked contraction in secondary copper rod supply. Under the dual effects of "cost push" and "supply contraction," secondary copper rod prices gradually moved away from the previous discount pattern and turned to a premium against futures.

After the Lantern Festival, downstream wire and cable enterprises basically resumed normal production, but tight secondary copper rod supply was unable to meet their procurement demand, forcing them to increase the share of copper cathode rod purchases. Although secondary copper rod producers currently insist on premium quotes, actual transactions have shown divergence: the final average transaction price for terminal wire and cable enterprises was mostly near parity, while transactions at the trader level generally involved discounts of 300-500 yuan/mt. This indicates that if there is insufficient room for negotiation on secondary copper rod prices, both end-users and traders will turn to purchasing copper cathode rod. Overall, against the backdrop of high invoice tax rates for raw materials and a policy environment that remains unclear, secondary copper rod prices are expected to remain at a relatively high level, and the price relationship between it and copper cathode rod, as well as end-user procurement choices, will continue to adjust dynamically with changes in costs and supply structure.