SHANGHAI, Aug. 1 (SMM) –A recent SMM survey of 24 major domestic copper smelters (total capacity: 4.796 million mt/yr) revealed the following insights:

1) Operating Rates Up Slightly in July
The average operating rate at the 24 major domestic copper smelters during July was 90.05%, up slightly from June’s 88.28%. The average spot copper price during June was RMB 68,900/mt, but surged by almost RMB 2,600/mt in July, stimulating copper output and helping boost the average rate at larger copper smelters by 3% and increasing the overall average during July by 1.77%. As scrap copper prices rose slower than refined copper prices during July, the price gap between the two increased to RMB 2,000/mt, up from June’s RMB 1,400/mt, which caused enterprises using scrap copper as a raw material to increase production.  

Operating rates during July at the surveyed copper smelters were not affected by electricity restrictions, but power shortages may become more severe as hotter temperatures increase electricity demand. Despite the limited impact on copper smelters, SMM believes operating rates at smelters will not likely increase during August.  

2) Refined Copper Inventories Down In July, Raw Material Inventories Stable
Refined copper inventories at the surveyed copper smelters were 58,080 mt in July, down modestly from June levels. An increase of RMB 2,600/mt in average spot copper prices during July increased smelter interest in output, but SHFE copper price gains were weaker than LME copper price gains during July, causing the price ratio to fall significantly and increase import losses to around RMB 2,000/mt. Expanding losses for imported copper prompted downstream processors to increase demand for domestic copper. Given current high operating rates, there is little possibility refined copper inventories will fall further during August during the seasonal low demand period. 

Copper smelters which use copper concentrate as a raw material told SMM that copper concentrate supply remains normal, although still not at levels after the Japanese earthquake in March. However, now that Japanese copper smelters have resumed production, spot TC/RC for imported copper concentrate has fallen to USD 70-90/mt (cents 7.0-9.0/lbs). Copper smelters using scrap copper as raw materials said they were making purchases on an as-needed basis rather than risking building large stocks while prices are volatile.