China's copper cathode output was 985,100 mt in April

In April, SMM data showed that China's copper cathode output was 985,100 mt, a month-on-month decrease of 14,400 mt or 1.44%, and a year-on-year increase of 1.56%. The output was 20,100 mt higher than the expected 965,000 mt. The cumulative output from January to April was 3.9047 million mt, an increase of 222,200 mt or 6.03% year-on-year.

The reason for the month-on-month decline in output in April was that seven smelters underwent maintenance. The decline in output was not as large as expected due to four factors: 1. The sharp rise in copper prices in April widened the price spread between copper cathode and copper scrap, and the supply of blister copper and copper anode increased. According to our research, a large number of copper rod plants using copper scrap as raw material switched to produce blister copper and anode plates in April. By the end of April, some anode plate factories even asked customers to buy goods, which shows that the supply of anode plates was very abundant. This can also be reflected in the continued increase in the RCs and processing fees of blister copper and anode plates (as of April 30, SMM RCs of domestic blister copper in south China were 1,500 yuan/mt, up 450 yuan/mt from the previous month; domestic anode plate processing fee was 1,200 yuan/mt, up 400 yuan/mt from the previous month). Smelters could purchase enough raw materials to significantly reduce the impact of maintenance. 2. Sulphuric acid prices rose in April; gold and silver prices were at historical highs. By-products could make up for production losses, and smelters have little motivation to reduce production. 3. A smelter in east China gradually returned to normal production after completing technical transformation. 4. Due to the large discounts of copper rod made from copper scrap, some smelters even purchased copper rod made from copper scrap as raw materials to ensure production. We believe that the average operating rate of the copper cathode industry in April was 86.45%, a drop of 1.55 percentage points month-on-month; the average operating rate of large smelters was 90.99%, a drop of 3.62 percentage points month-on-month; the average operating rate of medium-sized smelters was 81.27%, an increase of 3.15 percentage points month-on-month; and that of small smelters was 66.48%, a decrease of 5.37 percentage points month-on-month.

In May, more smelters will undergo maintenance. According to our current statistics, 8 smelters will undergo maintenance, involving 1.64 million mt of smelting capacity. This will be the main reason for the decline in production in May. Nonetheless, due to the current ample supply of blister copper and anode plates, many smelters have sufficient raw materials, which will lead to a smaller-than-expected decline in production. In addition, a smelter in the south-west began to produce after its relocation.

Based on the production schedules of various companies, SMM estimates that domestic copper cathode output in May will be 977,100 mt, a month-on-month decrease of 8,000 mt or 0.81%, and a year-on-year increase of 18,300 mt or 1.91%. The cumulative output from January to May is expected to be 4.8818 million mt, a year-on-year increase of 5.18% or 240,500 mt. In May, the average operating rate of the copper cathode industry is estimated at 85.83%, a decrease of 0.62 percentage point from the previous month; the average operating rate of large smelters will be 89.38%, a decrease of 1.61 percentage points from the previous month; that of medium-sized smelters should be 82.10%, a rise of 0.83 percentage point from the previous month; that of small smelters will be 68.50%, a rise of 2.02 percentage points from the previous month. A large number of smelters will undertake maintenance in June, and domestic copper production is expected to decline.