SMM Cu Survey: Average Operating Rate at Copper Smelters During January Falls to 85.14% -Shanghai Metals Market

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SMM Cu Survey: Average Operating Rate at Copper Smelters During January Falls to 85.14%

SMM Insight 10:51:42AM Feb 20, 2012 Source:SMM

SHANGHAI, Feb. 20 (SMM) –SMM’s most recent survey of 20 major domestic copper smelters (total capacity: 4.87 million mt/yr) yielded the following insights:

1) Average Operating Rate at Copper Smelters During January Falls to 85.14%

The average operating rate during January at the surveyed copper smelters fell to 85.14%, down by nearly 5% MoM. Copper smelters normally scale back production during January, which is a traditional low demand period, in order to avoid excessive inventories. Some smelters also conducted unit maintenance during January, which also lowered the average operating rate. The SHFE/LME copper price ratio began to turn against imports in mid-January, increasing losses for copper importers. In addition, copper smelters had no intention of purchasing additional spot copper concentrate in the context of being able to fulfill long-term contracts, opting instead to cut production since spot TC/RCs for copper concentrate stood low at USD 20-40/mt (cents 2.0-4.0/lb).

Copper inventories at SHFE warehouses, bonded warehouses, and at copper smelters have all grown over the past month, so the possibility exists that domestic copper smelters will maintain low operating rates throughout February. 

2) Inventories at Copper Smelters Rise, Copper Concentrate Inventories Sufficient
Operating rates at copper semis processors fell sharply during January due to the New Year and Chinese New Year holidays, but operating rates at copper smelters did not fall as much, which caused copper inventories at smelters to surge to 101,050 mt. These surveyed copper smelters told SMM their copper concentrate inventories had been sufficient after replenishing  stocks during 4Q 2011 when copper prices were lower. After the SHFE/LME copper prices ratio moved lower, spot TC/RCs for copper concentrate rose slightly to USD 40/mt (cents 4.0/lb), but due to losses at copper concentrate importers, smelters reduced purchases of copper concentrate.

With regard to scrap copper, the price gap between scrap and refined copper returned to normal levels after copper prices rallied in January, so purchases of scrap copper began to increase gradually, causing scrap copper inventories to tighten. The SHFE/LME copper price ratio continued to deteriorate in February, causing increasing losses for scrap copper importers and less interest in importing. This will only leave scrap copper inventories unchanged over the near term.
 

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SMM Cu Survey: Average Operating Rate at Copper Smelters During January Falls to 85.14%

SMM Insight 10:51:42AM Feb 20, 2012 Source:SMM

SHANGHAI, Feb. 20 (SMM) –SMM’s most recent survey of 20 major domestic copper smelters (total capacity: 4.87 million mt/yr) yielded the following insights:

1) Average Operating Rate at Copper Smelters During January Falls to 85.14%

The average operating rate during January at the surveyed copper smelters fell to 85.14%, down by nearly 5% MoM. Copper smelters normally scale back production during January, which is a traditional low demand period, in order to avoid excessive inventories. Some smelters also conducted unit maintenance during January, which also lowered the average operating rate. The SHFE/LME copper price ratio began to turn against imports in mid-January, increasing losses for copper importers. In addition, copper smelters had no intention of purchasing additional spot copper concentrate in the context of being able to fulfill long-term contracts, opting instead to cut production since spot TC/RCs for copper concentrate stood low at USD 20-40/mt (cents 2.0-4.0/lb).

Copper inventories at SHFE warehouses, bonded warehouses, and at copper smelters have all grown over the past month, so the possibility exists that domestic copper smelters will maintain low operating rates throughout February. 

2) Inventories at Copper Smelters Rise, Copper Concentrate Inventories Sufficient
Operating rates at copper semis processors fell sharply during January due to the New Year and Chinese New Year holidays, but operating rates at copper smelters did not fall as much, which caused copper inventories at smelters to surge to 101,050 mt. These surveyed copper smelters told SMM their copper concentrate inventories had been sufficient after replenishing  stocks during 4Q 2011 when copper prices were lower. After the SHFE/LME copper prices ratio moved lower, spot TC/RCs for copper concentrate rose slightly to USD 40/mt (cents 4.0/lb), but due to losses at copper concentrate importers, smelters reduced purchases of copper concentrate.

With regard to scrap copper, the price gap between scrap and refined copper returned to normal levels after copper prices rallied in January, so purchases of scrap copper began to increase gradually, causing scrap copper inventories to tighten. The SHFE/LME copper price ratio continued to deteriorate in February, causing increasing losses for scrap copper importers and less interest in importing. This will only leave scrap copper inventories unchanged over the near term.