Copper Cathode Production Declined as Expected in January but Will Increase Again in February [SMM Analysis]

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SMM, January 24:
         

     In January, SMM China's copper cathode production decreased by 81,700 mt MoM, a decline of 7.46%, up 4.54% YoY, and exceeded expectations by 6,500 mt.

    Copper cathode production in January declined significantly as expected, mainly due to the following reasons: 1. For some smelters, the statistical period in January was from January 1 to January 25, and the reduced statistical duration led to a noticeable drop in production; 2. Two smelters underwent maintenance in January, which also contributed to the production decline; 3. Many smelters experienced varying degrees of production decline due to tight copper concentrates and blister copper supply (as of January 24, the SMM Imported Copper Concentrates Index (weekly) was $1.76/mt, and the SMM Domestic Blister Copper RCs in south China (weekly) was 800 yuan/mt).

In summary, the sample operating rate of the copper cathode industry in January was 80.22%, down 7.50 percentage points MoM; among them, the operating rate of large smelters was 83.16%, down 9.37 percentage points MoM, medium-sized smelters was 75.13%, down 3.6 percentage points MoM, and small smelters was 67.23%, down 2.63 percentage points MoM. The operating rate of smelters using copper concentrates was 86%, down 6.1 percentage points MoM; smelters not using copper concentrates (copper scrap or anode plates) had an operating rate of 68.7%, down 9 percentage points MoM.

Entering February, no smelters are undergoing maintenance, and smelters that underwent maintenance in January have resumed normal production, leading to increased output. Additionally, the statistical period for some smelters has returned to normal, and the extended statistical duration has also contributed to the production increase. However, due to tight copper scrap supply, the production of copper cathode by smelters using copper scrap continues to decline, and this downward trend may persist in the future. Lastly, attention should be paid to whether copper cathode producers using copper concentrates will implement production cuts due to smelting losses. It is reported that based on the spot order price of copper concentrates, the loss is approximately 1,600 yuan/mt, and based on long-term contracts, the loss is about 800 yuan/mt.

    According to SMM's production schedule data, domestic copper cathode production in February is expected to increase by 41,600 mt MoM, a rise of 4.1%, and up 105,100 mt YoY, an increase of 11.06%. The cumulative production for January-February is expected to increase by 149,100 mt YoY, a rise of 7.77%. The sample operating rate of the copper cathode industry in February is expected to be 83.53%, up 3.31 percentage points MoM; among them, the operating rate of large smelters is expected to be 87.40%, up 4.24 percentage points MoM, medium-sized smelters is expected to be 76.44%, up 1.31 percentage points MoM, and small smelters is expected to be 67.84%, up 0.61 percentage points MoM. The operating rate of smelters using copper concentrates is expected to be 90.1%, up 4.1 percentage points MoM; smelters not using copper concentrates (copper scrap or anode plates) are expected to have an operating rate of 68.6%, down 0.1 percentage points MoM, marking a decline for the second consecutive month.