SHANGHAI, Mar. 19 (SMM) –SMM's most recent survey of 21 major domestic copper smelters (total capacity: 5.2 million mt/yr) yielded the following insights:
1) Average Operating Rate for February at Copper Smelters Rises to 88.07%
The average operating rate for February at the surveyed smelters was 88.07%, up 2.9% from January. As operating rates for copper semis rose during February, refined copper demand also rose, with copper smelters beginning to match production based on annual output targets. Furthermore, SMM's spot copper prices averaged at RMB 59,412/mt during February, the highest mark since October last year, also driving smelter interest in increasing output.
2) Refined Copper Inventories Down, Copper Concentrate Inventories Sufficient
Refined copper inventories last week at those copper smelters surveyed by SMM were 69,450 mt, down 31,600 mt from the previous survey. Copper smelters increased sale volumes as operating rates at copper semis producers rose in February. In addition, some copper smelters chose to deliver SHFE current-month copper contracts when prices surged to RMB 61,000/mt, in order to reduce inventory pressure.
Copper concentrate inventories at the surveyed copper smelters were considered sufficient, though. As a result, copper smelters had little interest in buying spot copper concentrate given the unfavorable SHFE/LME copper price ratio. This weak spot copper concentrate demand caused spot TC/RC for copper concentrate to rebound to USD 40-50/mt (cents 4.0-5.0/lb) in February. As spot copper prices fluctuated around RMB 60,000/mt, scrap copper supply grew significantly from 4Q 2011 levels. However, as the price gap between scrap and refined copper still does not allow smelters to cover costs, growing scrap copper inventories will only gradually alleviate tight supply.