Two Weeks After the Lantern Festival, Downstream Gradually Resumes Work: Is the Resistance to Copper Cathode Rod Destocking Rising Instead of Falling? [SMM Analysis]

       Two weeks have passed since the Lantern Festival, and the festive atmosphere has gradually faded. Most downstream enterprises have fully resumed work and production after the festival. However, the slow recovery of end-use consumption after the holiday, combined with copper prices fluctuating at highs, has consistently suppressed downstream purchasing sentiment. What is the current situation regarding the operating rates and inventories of copper cathode rod enterprises? What are the psychological price levels of downstream buyers? How does the recovery of consumption vary across different sectors? The following is a detailed analysis:

       As shown in the chart above, copper prices rose after the holiday and hovered at highs, significantly suppressing downstream restocking demand. According to SMM, both copper cathode rod enterprises and downstream wire and cable factories experienced extended holiday shutdowns on a YoY basis. Additionally, SMM data indicates that post-holiday finished product inventories at copper cathode rod enterprises reached high levels, with destocking progress clearly lagging behind previous years. Orders were mainly based on pre-holiday orders on hand, with few new orders. During the two weeks following the holiday, most copper cathode rod enterprises awaited downstream resumption of work and cargo pick-up after the Lantern Festival.

       Moving to the current timeline, two weeks have passed since the Lantern Festival, and downstream enterprises have gradually resumed full operations. However, according to SMM discussions, there has been no significant improvement in new orders or destocking efficiency for copper cathode rod enterprises. Most enterprises reported that end-use consumption still requires time to recover. Currently, most downstream enterprises' orders on hand are primarily based on pre-holiday tenders, with no urgent delivery timelines. Meanwhile, projects in infrastructure, real estate, and other sectors have not fully resumed, resulting in limited new orders and continued pressure on overall consumption for copper cathode rods. Although copper prices briefly dropped to 76,600 yuan/mt, the subsequent large-scale power outage in Chile pushed prices back above 77,000 yuan/mt. According to SMM, most downstream enterprises are likely to increase restocking only if copper prices fall below 76,000 yuan/mt. Therefore, the recovery of copper cathode rod consumption remained limited in February.

       As shown in the operating rate chart for copper cathode rods, operating rates gradually recovered after the holiday. However, according to copper cathode rod enterprises, destocking pressure has risen again, with finished product inventories increasing at many enterprises. If consumption continues to be suppressed this week, destocking across the supply chain will remain sluggish, potentially leading to a decline in operating rates this week or next week. The specific situation will depend on the destocking progress within the week. SMM will continue to monitor the latest developments in the industry for you.