China's copper cathode output in February

SMM data showed that China's copper cathode output in February was 950,300 mt, a month-on-month decrease of 19,500 mt or 2.01%, but a year-on-year increase of 4.68%. Output decreased 9,100 mt from the expected 959,400 mt. The cumulative output from January to February was 1.9201 million mt, an increase of 159,000 mt or 9.03% year-on-year.

There are several reasons for the unexpected decline in output in February: 1. Affected by the continued decline in copper concentrate TCs (as of March 1, the SMM imported copper concentrate TC index (weekly) was reported at $16.41/mt, a decrease of $7.09/mt from a week earlier, a new low in recent years. If the smelters purchase spot copper concentrate for production, the current loss is 1,417 yuan/mt; if the smelters use copper concentrate under long-term contracts for production, the current profit is 918 yuan/mt). Some smelters have lowered the input amount, reducing output. 2. A smelter in south-west China began to relocate, causing its output to drop significantly; 3. Some smelters reduced their operating rates during the Chinese New Year holiday. We believe that the average operating rate of copper cathode industry fell 1.38 percentage points month on month to 83.80% in February.

In March, only one smelter has overhaul plan, and another has postponed its overhaul until April. According to our survey, as of the beginning of March, eight smelters had reduced their raw material inputs, but that had not affected their output for the time being. Despite this, the total output in March still increased slightly compared with February. The main reasons are as follows: 1. In March, various smelters increased their production after the Chinese New Year holiday, and the number of production days also increased; 2. The two smelters that were put into operation at the end of last year continued to yield output; 3. After a smelter completely stopped production, most of its blister copper and anode plates were sold, which to a certain extent alleviated the shortage of raw materials for other smelters.

Based on the production schedules of various companies, SMM estimates that domestic copper cathode output in March will be 970,200 mt, a month-on-month increase of 19,900 mt or 2.09%, and a year-on-year increase of 18,800 mt or 1.98%. The cumulative output from January to March is expected to be 2.89 million mt, a year-on-year increase of 6.55% or 177,800 mt. However, this data should be the highest value in the first half of the year. In the second quarter, smelters will enter a period of intensive maintenance. According to our current survey, 7 smelters will be overhauled in April, involving a smelting capacity of 1.21 million mt. There are 8 smelters that need to be overhauled, involving a rough refining capacity of 1.84 million mt. In June, there will be 8 smelters that need to be overhauled, involving a smelting capacity of 1.56 million mt.