SHANGHAI, July 13 (SMM) – A recent SMM survey of 23 major domestic copper smelters (total capacity: 4.163 million mt/yr) revealed the following insights:
1) Operating Rates Fall
Based on the SMM survey, the average operating rate at the 23 major domestic copper smelters was 89.26% in June, down 3.66% from 92.92% in May. Operating rates at smelters with capacity below 100kt/yr were down significantly from the 85.82% rate in May, falling to 67.73% in June. The rate decline was due mainly to the use of scrap copper as raw material. Existing high prices for scrap copper and supply tightness made purchasing raw materials difficult, causing smelters to cut production. Operating rates at medium and large copper smelters remained above 90%, but were down on a yearly basis due to maintenance at some units.
2) Summer Unit Maintenance
Many copper smelters have entered the traditional unit maintenance period, and this will affect domestic copper production. Output at crude smelting producers with reliable raw material supply should not drop significantly. However, SMM believes China’s refined copper supply will fall due to production cuts at copper smelters using scrap copper as raw material, and due to unit maintenance at other producers. The lower output will support domestic copper prices, especially spot copper prices. However, consumption of copper during the summer will fall from previous high levels, and this weaker demand may offset some of the price gains from tighter supply.
3) Refined Copper Inventories Grow, Raw Material Stocks Tighter
The survey also revealed that inventories of refined copper at the 23 copper smelters were 29,750 mt in June, up from May levels. In addition to one new producer added in the survey, preparations for long-term contract supply before unit maintenance begins is believed to be another reason behind rising refined copper stocks. Raw material supply at medium and large copper smelters is considered sufficient due to long-term contracts for imported copper concentrate. However, smaller smelters which outsource crude and scrap copper are facing supply shortages. Some of the smaller smelters say further production cuts may be necessary if raw material supply continues to tighten.
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