China's copper cathode output rose in May

SMM data showed that China's copper cathode output in May was 1.0086 million mt, up 23,500 mt or 2.39% MoM, and up 5.19% YoY, exceeding the expected 977,100 mt by 31,500 mt. The output once again surpassed the 1 million mt mark, setting a new monthly high for the year. The cumulative output from January to May was 4.9133 million mt, up 272,000 mt YoY, an increase of 5.86%.

The main reasons for the higher-than-expected output in May are as follows: 1. The historical high copper prices in May widened the price difference between copper cathode and copper scrap, significantly increasing the supply of blister copper and copper anode, as reflected by the continuous rise in RCs for blister copper and processing fees of anode plates (as of May 31, SMM's domestic blister copper RCs in south China reported at 2,100 yuan/mt, up 600 yuan/mt MoM; domestic anode plate processing fees reported at 1,400 yuan/mt, up 200 yuan/mt MoM); some smelters even directly purchased copper rod made from copper scrap as raw material to ensure output. 2. The ample raw materials significantly reduced maintenance at smelters. According to SMM, the impact from maintenance on output at several smelters weakened due to sufficient anode plate procurement. 3. The rapid commissioning of a smelter in south-west China also contributed to the higher-than-expected total output. In summary, SMM believes that the overall operating rate of the copper cathode industry in May was 88.46%, up 2.01 percentage points MoM; the operating rate of large smelters was 92.42%, up 1.44 percentage points MoM, the operating rate of medium-sized smelters was 84.21%, up 2.94 percentage points MoM, and the operating rate of small smelters was 69.40%, up 2.92 percentage points MoM.

Entering June, many smelters are still scheduled for maintenance. According to SMM statistics, eight smelters will undergo maintenance, involving a total smelting capacity of 1.56 million mt, which is the main reason for the expected decline in output in June. Additionally, the current negative spot TCs for copper concentrate (as of May 31, SMM's Imported Copper Concentrate index reported at -$0.97/mt, down $5.09/mt MoM). Some smelters, unable to procure enough anode plates to make up for the copper concentrate shortfall, will have to reduce their operating rates in June. The copper price fell from highs in mid-to-late May, narrowing the price difference between copper cathode and copper scrap and thus reducing the supply of copper scrap and anode plates. Output at some smelters fell due to decreased raw material replenishment.

Based on the production schedules of various enterprises, SMM expects domestic copper cathode output in June to be 985,000 mt, down 23,600 mt MoM, or a decrease of 2.34%, and up 67,100 mt YoY, or an increase of 7.31%. The cumulative output from January to June is expected to be 5.8983 million mt, up 339,100 mt or 6.1% YoY. The overall operating rate of the copper cathode industry in June is expected to be 86.54%, down 1.92 percentage points MoM; the operating rate of large smelters is expected to be 89.86%, down 2.46 percentage points MoM, the operating rate of medium-sized smelters is expected to be 82.04%, down 2.17 percentage points MoM, and the operating rate of small smelters is expected to be 74.66%, up 5.25 percentage points MoM. Only a few smelters are scheduled for maintenance in July, and the output is expected to rise further in July.