SHANGHAI, Mar. 7 (SMM) – A recent SMM survey of 22 major domestic copper smelters (total capacity: 4.39 million mt) revealed the following insights:

1) Operating Rates Improve Significantly 
According to the survey, the average operating rate at the 22 domestic copper smelters was 91.94% in March, up 3.55% from January's 88.39%, and due to the following factors.  First, Yunnan Copper completed unit maintenance and resumed production, which raised output.  Second, high copper prices gave additional incentive for smelters to increase output. Third, ample inventories of raw material allowed higher operating rates at smelters.  However, it is worth noting that availability of scrap copper was tightening, despite claims from smelters using scrap copper as raw material that existing inventories were enough for production.  Tightening supply will likely affect operating rates at those smelters in the future.  

2) Refined Copper Inventories at Copper Smelters Up, Raw Material Inventories Ample 
Based on the survey, refined copper inventories at the surveyed smelters averaged 75,600 mt, up from 67,783 mt in January due to the following reasons. First, copper smelters remained online during Chinese New Year, but copper trading was essentially halted during the period.  In addition, downstream producers have not yet fully resumed production, reducing demand for refined copper. Second, copper smelters showed more interest in increasing output since prices were above RMB 70,000/mt. However, downstream producers expressed little purchasing interest with prices high. Third, some downstream producers chose to purchase scrap copper instead of refined copper due to high prices, negatively affecting demand for refined copper. However, high refined copper inventories should fall during the traditional peak demand period beginning in late March. Downstream producers should enter the market to purchase if copper prices remain stable above RMB 70,000/mt.

Copper smelters in the survey told SMM that raw material inventories remain ample. Currently, TC/RC of copper concentrate was between USD 65-90/mt (6.5-9.0 cents/lbs), with the average around USD 80/mt (8.0 cents/lbs). Ample supplies of copper concentrate helped TC/RC remain high, while copper concentrate inventories at copper smelters were also allowing smelters to run at high operating rates. Copper smelters with scrap copper as the raw material reduced purchases of scrap copper due to high costs, with stocks reported sufficient for one month’s production. Some smelters say they plan to expand capacity, but supply of scrap copper will be an issue and will require imported scrap copper.

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