July Copper Plate/Sheet and Strip Operating Rate Declined as Expected, Copper Prices Fell to Offset Off-Season Atmosphere [SMM Analysis]

According to the SMM survey, the operating rate of copper plate/sheet and strip in July 2024 was 67.78%, down 0.29 percentage points MoM and 2.00 percentage points YoY. Among them, the operating rate of large enterprises was 72.31%, medium-sized enterprises 62.81%, and small enterprises 61.20%. (Surveyed enterprises: 36, total production capacity: 2.681 million mt). July is traditionally the off-season for the copper plate/sheet and strip industry. However, as copper prices fell to around 72,000 yuan/mt, end-users' purchasing sentiment finally warmed up, resulting in only a slight YoY decline in the operating rate. From the perspective of enterprise scale, the operating rate of small and medium-sized enterprises was still significantly affected by the off-season. The trend of deteriorating processing fees for some red and yellow copper plate/sheet and strip continued, prompting some enterprises to actively seek transformation and invest in R&D, leading to greater differentiation in product categories. Due to policy impacts, the supply of invoiced secondary copper was tight and expensive, and imported sources were in short supply, causing procurement difficulties for some enterprises and suppressing the operating rate to some extent. From the end-user perspective, orders in the automotive industry remained stable, power orders decreased, and orders in consumer electronics circuits, communications, and clothing sectors increased, resulting in overall stable demand.

July Copper Plate/Sheet and Strip Enterprises' Raw Material Inventory Ratio was 14.12%

According to SMM statistics, the raw material inventory ratio of copper plate/sheet and strip enterprises in July was 14.12%, down 4.82 percentage points MoM. In July, as copper prices continued to fall, end-users' purchasing sentiment increased compared to before, but plate/sheet and strip enterprises remained cautious in procurement, mainly consuming previous raw material inventories, leading to a decrease in overall inventory levels. By late July, copper prices had fallen to previous lows, and enterprises increased their inventory levels. However, due to poor cash flow efficiency in the previous period, procurement was still mainly based on just-in-time inventory, resulting in a decline in the inventory ratio. (Raw material inventory ratio = raw material inventory/monthly production).

The Operating Rate of Copper Plate/Sheet and Strip is Expected to be 67.80% in August 2024

Looking ahead to August 2024, according to the SMM survey on the production scheduling of copper plate/sheet and strip enterprises, August will still be within the traditional off-season for copper plate/sheet and strip. However, as copper prices have broken down to around 70,000-72,000 yuan/mt, end-user orders may increase. Suppressed by poor cash flow in H1, the plate/sheet and strip industry is expected to experience a slow recovery during the overall off-season. The difference in operating rates between large and small enterprises is expected to further widen. The operating rate of copper plate/sheet and strip in August is expected to be 67.80%, up 0.02 percentage points MoM.