SMM China August Copper Cathode Production and September Forecast

According to SMM, in August, China's copper cathode production remained above 1 million mt. It decreased by 1.43% MoM but increased by 2.48% YoY, exceeding expectations. The cumulative production from January to August increased significantly by 6.5% YoY. (Due to the commissioning of new smelters and capacity adjustments of old smelters, the capacity of SMM August survey sample was adjusted to 14.475 million mt.)

The main reasons for the production decline in August are as follows: 1. A major smelter in North China underwent maintenance, causing a significant drop in production; 2. Due to the tight supply of blister copper and copper anode, more and more smelters could not procure enough raw materials for production, leading to a decrease in production. This is also reflected in the continuous decline in blister copper RCs and copper anode processing fees (as of August 30, SMM domestic blister copper RCs were reported at 900 yuan/mt in South China, down 200 yuan/mt from the previous month; domestic copper anode processing fees were reported at 500 yuan/mt, down 50 yuan/mt from the previous month). The reasons for the smaller-than-expected decline are: 1. The recent rebound in sulphuric acid prices has partially offset smelting losses and mitigated the risk of inventory buildup at smelters; 2. Several newly commissioned smelters started production in August, and the production ramp-up speed of a smelter in Southwest China also accelerated.

In summary, the sample operating rate of the copper cathode industry in August was 83.02%, down 5.39 percentage points MoM. Among them, the operating rate of large smelters was 85.30%, down 5.92 percentage points MoM; the operating rate of medium-sized smelters was 83.43%, down 2.05 percentage points MoM; and the operating rate of small smelters was 60.07%, down 13.83 percentage points MoM. The operating rate of smelters using copper concentrate was 86.30%, down 5.1 percentage points MoM; the operating rate of smelters not using copper concentrate (using copper scrap or copper anode instead) was 65.30%, down 6.5 percentage points MoM.

Entering September, according to SMM statistics, two smelters will undergo maintenance, involving a blister copper capacity of 500,000 mt, down from 730,000 mt in August. However, several smelters' blister copper plants will start production, significantly increasing the demand for copper concentrate. Meanwhile, more smelters are affected by the tight supply of copper concentrate, blister copper and copper anode, leading to increased production cuts. However, the resumption of production at smelters that underwent maintenance in August and the release of production from newly commissioned smelters will bring considerable increments.

According to the production schedules of various smelters, SMM expects domestic copper cathode production in September to remain above 1 million mt, with a slight increase of 0.21% MoM and a slight increase YoY. The cumulative production from January to September is expected to rise by 5.77% YoY or 489,500 mt. The sample operating rate of the copper cathode industry in September is expected to be 83.28%, up 0.26 percentage points MoM. Among them, the operating rate of large smelters is expected to be 85.55%, up 0.25 percentage points MoM; the operating rate of medium-sized smelters is expected to be 81.72%, down 1.71 percentage points MoM; and the operating rate of small smelters is expected to be 65.98%, up 5.91 percentage points MoM. The operating rate of smelters using copper concentrate is expected to be 87.30%, up 1 percentage point MoM; the operating rate of smelters not using copper concentrate (using copper scrap or copper anode instead) is expected to be 61.80%, down 3.5 percentage points MoM, continuing a three-month decline, with further decline expected in the future. Finally, the number of smelters with maintenance plans in October will increase, and production cuts due to tight raw material supply will also increase. The production released by newly commissioned smelters will determine whether the total production will increase or decrease. SMM expects production in October to decline again, but the decline will not be significant.