The copper scrap market this week operated under the impetus of a strong macro-driven rally in copper prices. Futures and spot prices rose in tandem, but the intensifying divergence in sentiment and behavior between upstream and downstream participants along the industry chain lent the market a complex character best described as "price-driven transactions amid an unchanged weak supply-demand landscape." On the supply side, structural contraction coexisted with wait-and-see sentiment. In the copper scrap segment, suppliers' willingness to sell warmed notably as copper prices climbed, with shipment activity picking up — particularly after copper prices breached the 100,000 yuan mark, prompting some suppliers to take profits at elevated levels. However, as prices pushed even higher, suppliers' bullish expectations for the market ahead rekindled a tendency to hold back from selling, with most opting to stockpile and wait for further price gains. As a result, actual circulating supply in the market did not increase meaningfully despite rising prices. Meanwhile, the secondary copper rod production side faced more direct supply shocks. According to an SMM survey, some enterprises in east China chose to halt production and adopt a wait-and-see stance due to renewed uncertainties in local policies, while enterprises in central and south-west China were forced to reduce operating days under tax compliance pressure. This directly led to a WoW decline in the secondary copper rod operating rate to 4.94%, with active supply-side contraction becoming a key factor constraining market liquidity.
On the demand side, a clear contradiction between "price sensitivity" and "insufficient momentum" was evident. Although the average price difference between copper cathode rod and secondary copper rod widened by 410 yuan/mt WoW to 1,600 yuan/mt, once again highlighting the theoretical cost advantage of secondary copper rod and stimulating downstream wire and cable enterprises' and traders' willingness to purchase and pick up goods, actual transaction volumes remained limited. This was primarily constrained by three pressures: First, elevated absolute copper prices severely suppressed end-use consumption sectors' actual purchasing capacity and willingness, with limited end-user orders restricting the sustainability of demand. Second, while traders showed some purchasing enthusiasm, they widely reported that secondary copper rod enterprises had restricted the orders they could accept due to difficulties in restocking raw materials, obstructing demand transmission. Third, downstream scrap utilization enterprises' purchasing sentiment underwent rapid shifts — from initial cautious observation, to a rush to buy amid continuous price rise to restock after prices breached key levels, and then to a "fear of heights" halt in purchasing as prices continued to surge. Such sentiment fluctuations caused demand release to exhibit a pulsed pattern, making it difficult to form stable support. Industry profitability remained dire. SMM model calculations showed that the average gross profit margin on secondary copper rod sales during the week remained deep in loss territory at -698 yuan/mt, while the recovery in the price difference between primary metal and scrap (the price spread between copper cathode and copper scrap) lagged relatively behind. This reflected the slow adjustment of tax-inclusive copper scrap prices, underpinned by invoice tax rate costs under the "reverse invoicing" policy, which continued to squeeze downstream processing margins. Overall, the copper scrap market is currently operating amid an intense tug-of-war between "high-price stimulus" and "weak fundamental constraints." Although rising copper prices briefly activated market trading sentiment, the high price levels themselves suppressed the intensity and sustainability of demand, while supply contraction and cost rigidity driven by policy factors constituted longer-term headwinds. It is expected that in the near term, capacity in policy-affected regions will be difficult to restore quickly. If supply continues to shrink, it may push secondary copper rod prices relatively stronger, thereby causing the currently widened price difference between copper cathode rod and secondary copper rod to face narrowing pressure once again. Breaking out of the current wait-and-see deadlock will depend on the stabilization of macro sentiment, a substantive recovery in end-user orders, and further clarification of detailed industrial policy measures.
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