Enterprises Halt Production to Observe Policy Impact, Secondary Copper Rod Operating Rate Declines [SMM Analysis]

SMM, January 3:

      According to SMM survey data, the operating rate of secondary copper rod plants reached 21.74% this week (18 surveyed enterprises, total capacity of 1.94 million mt/year), down 6.49 percentage points WoW and 16.15 percentage points YoY. The average price spread of refined and secondary copper rods this week was 729 yuan/mt, a decrease of 29 yuan/mt compared to last week's 758 yuan/mt. Meanwhile, the average discount of secondary copper rods in Jiangxi was 180 yuan/mt, down 10 yuan/mt WoW. After the New Year’s holiday, some secondary copper rod plants opted for a short-term production halt to observe the actual impact of policies, leading to a decline in the operating rate this week.

        According to the SMM survey, secondary copper rod enterprises that continued normal production had stockpiled some secondary copper raw materials before the New Year, while those that halted production mainly faced insufficient raw materials or concerns about potential increases in raw material costs after policy implementation, which could lead to unnecessary losses. This week, the finished product inventories of the sampled secondary copper rod enterprises stood at 3,900 mt, down 1,850 mt from last week's 5,750 mt. Some secondary copper rod plants reported that they had not yet received specific notifications regarding the implementation of "reverse invoicing," but resource recycling companies were already unable to issue corresponding VAT invoices. Without access to taxed secondary copper raw materials, secondary copper rod plants have adopted a cautious approach to procurement after the New Year, primarily relying on secondary copper raw material inventories purchased before December 31 for production.

        Looking ahead to next week, as the year-end approaches, secondary copper rod enterprises that have halted production show weak willingness to resume operations. The operating rate next week is expected to reach 22.93%. However, some secondary copper rod plants need to fulfill pre-holiday orders, which will slightly increase production, resulting in only a modest rise in the operating rate.

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