Copper prices experienced wild swings this week, with a cumulative decline of over 400 yuan/mt. During the period, news of delayed production resumptions at an Indonesian copper mine triggered a single-day surge of 1,630 yuan/mt, which quickly pulled back. The wild swings dominated overall sentiment across the secondary copper industry chain. Amid price fluctuations, the market exhibited a typical cautious tug-of-war pattern characterized by "supply holding prices firm, demand searching for a bottom, sluggish transactions, and diverging expectations." The supply side faced dual pressure from inventory and capital. As downstream payment collection cycles extended significantly to around one week, a large number of copper scrap traders saw inventory accumulate. Although they actively sought cash transactions to relieve pressure, deals remained difficult to close. The sharp pullback in copper prices at the beginning of the week stimulated some secondary copper rod enterprises to restock on dips, slightly easing traders' inventory pressure, but overall circulation volumes did not increase significantly. Traders were generally unwilling to follow price cuts, choosing to hold prices firm on shipments. Market transactions were mainly concentrated on small volumes of previously high-priced historical inventory being sold off to recover capital. Tax-exclusive bare bright copper prices in Guangdong remained at 91,100-91,300 yuan/mt, flat WoW, also reflecting the supply side's willingness to hold prices firm.
The demand side's response was highly rational and full of strategic maneuvering. Although the decline in copper prices briefly stimulated a recovery in purchasing sentiment among secondary copper rod enterprises, which actively sought low-priced supplies in the market, their purchasing behavior strictly followed a "buy as needed" principle with no willingness to stockpile. When copper prices surged rapidly on news stimulus, downstream enterprises generally judged that the rally lacked actual demand support and was unsustainable, causing the purchasing sentiment index to decline rather than rise, displaying unusual calmness while waiting for prices to pull back. This cautious mentality was directly reflected in market transactions, with overall trading remaining sluggish throughout the week. From industry data, the secondary copper rod operating rate was 8.61% this week, up 1.77 percentage points WoW, indicating a slight recovery in production activity. However, the average price spread between primary and secondary copper rod narrowed to 1,338 yuan/mt, down 576 yuan/mt WoW, and the average discount of secondary copper rod in Jiangxi against copper futures also narrowed to 898 yuan/mt, meaning the economic substitution advantage of secondary copper rod weakened somewhat. Notably, against the backdrop of relatively firm raw material prices and narrowing finished product price spreads, the average gross profit margin for secondary copper rod sales calculated by the SMM model increased 190 yuan/mt WoW to 1,047 yuan/mt, which may be related to enterprises effectively controlling costs and digesting prior inventory. Overall, the core reason for the current market stalemate lies in the difficulty for sellers and buyers to form consensus expectations. On the supply side, constrained by inventory costs and capital pressure, suppliers want to ship at high prices but are unwilling to sell at low prices. On the demand side, due to weak end-user orders and low acceptance of high prices, buyers are only willing to make tentative purchases during deep pullbacks. Market circulation is sluggish, and the price transmission mechanism is obstructed. Looking ahead to next week, if copper prices retreat further, the circulation volume in the copper scrap market is expected to decrease. The contradiction between traders' desire to close deals at high prices and downstream buyers' purchasing power constrained by payment cycles will become more pronounced. If traders want to achieve spot cash transactions, they may have to sell inventory at reduced prices, and the market tug-of-war may enter a new phase. Overall, a comprehensive recovery across the industry chain still requires substantive improvement in end-use demand and easing of capital pressure.
