SMM Cu Survey: Operating Rates Remain Flat MoM at Major Domestic Copper Smelters

SHANGHAI, Dec. 13 (SMM) – 
The SMM survey of 24 major domestic copper smelters (total capacity: 4.193 million mt) revealed the following insights: 
 
1) Operating Rates Remain Flat MoM
According to the SMM survey, the average operating rate in December at the 24 major domestic copper smelters was 89.43%, down slightly from November’s 89.85%, but up from 87.27% YoY.  The slight month-on-month decline in operating rates indicates stable production, while the year-on-year increase is a sign most copper smelters are optimistic towards the future given current copper prices are RMB 10,000/mt higher compared with the same period last year.  In addition, ample raw material supplies also helped operating rates stay at high levels at the year’s end. 

2)  Refined Copper Inventories Fall MoM, Raw Material Inventories Ample
The SMM survey also shows that refined copper inventories in December at the surveyed copper producers were 54,670 mt, down from November’s 60,101 mt, and due to the following factors.  First, most smelters need to create cash flow at the year’s end and usually reduce finished goods inventories to do so.  Second, downstream producers were eager to make purchases in mid-to-late November when copper prices fell, which also helped cut  smelter inventories.  Third, domestic copper smelters adjusted finished goods inventories based on downstream purchases.  Smelters cut inventory levels after downstream purchasing volumes began falling in early December as copper prices rose.

Copper smelters in the survey said existing raw material inventories were able to meet production for at least one month.  Meanwhile, spot TC/RC of copper concentrate have risen to over USD 100/mt (10 cents/lbs).  Some smelters are unwilling to purchase even with spot offers above USD 110/mt (11 cents/lbs) due to the unfavorable price ratio and ample raw material inventories.  Market supply of scrap copper has fallen, but smelters are reporting no problems obtaining goods for production.  Scrap copper price increases are also slowing, another indication of sufficient supply.

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