China's copper cathode output in March

In March, SMM data showed that China's copper cathode output was 999,500 mt, an increase of 49,200 mt or 5.18% from the previous month, a year-on-year increase of 5.06%, and an increase of 29,300 mt from the expected 970,200 mt. The total output from January to March was 2.9196 million mt, an increase of 207,100 mt or 7.64% year-on-year.

There are several reasons for the sharp growth in output in March: 1. In March, many smelters increased production for a good start, and the number of production days also increased compared with February; 2. The two smelters that were put into operation at the end of last year continued to release output; 3. The copper concentrate TCs continued to decline (as of March 29, the SMM imported copper concentrate index (weekly) was reported at $6.38/mt, a decrease of $4.25/mt from the previous figure, continuing to set a new low in recent years. If the smelters purchase spot copper concentrate for production, the current losses expand to 1,745 yuan/mt. If the smelters use copper concentrate purchased under long-term contracts for production, they are currently making a profit of 1,299 yuan/mt, an increase of 381 yuan/mt from the previous month. The reason for the increase in profits is the recent increase in domestic sulphuric acid prices). Nonetheless, the rising prices of by-products such as sulphuric acid, gold and silver have reduced the losses to a certain extent. 4. The sharp rise in copper prices in March widened the price spread between copper cathode and copper scrap, and the supply of blister copper and copper anode increased (as of April 3, the SMM domestic blister copper RC was reported at 1,050 yuan/mt, up 200 yuan/mt from the previous month). Smelters could purchase more raw materials and avoid reducing production due to tight copper concentrate supply. We believe that the average operating rate of copper cathode industry rose 4.2 percentage points month on month to 88% in March.

In April, smelters will undertake intensive maintenance. According to our current survey, seven smelters will undertake maintenance in April, involving 1.21 million mt of smelting capacity. This will be the main reason for the decline in production in April. The current supply of blister copper and anode plates increased, but can hardly completely make up for the supply gap. SMM understood that there are still four smelters that have significantly reduced production due to the tight supply of copper concentrate.

Based on the production schedules of various companies, SMM estimates that domestic copper cathode output in April will be 965,000 mt, a month-on-month decrease of 34,500 mt or 3.45%, and a year-on-year decrease of 5,000 mt or 0.52%. The total output from January to April is expected to be 3.8846 million mt, a year-on-year increase of 5.49% or 202,100 mt. A large number of smelters will undergo maintenance in May and June, and domestic copper production is expected to decline in the next two months.