SHANGHAI, Jun. 24 (SMM) - A recent SMM survey of 24 major domestic copper smelters (total capacity: 6.1 million mt) revealed the following insights:
1) Average Operating Rate During May Steady at 89.46%
The latest SMM survey found the average operating rate at 24 major domestic copper smelters during May was 89.46%, unchanged on a monthly basis. A narrowing price difference between scrap and refined copper tightened scrap copper supply in China’s domestic markets, but the supply of long-term scrap copper contracts remained stable. In addition, recent strict customs requirements by China Customs have had only a limited impact on copper smelters, since smelters generally have high credit ratings. Only rates at smaller smelters using scrap copper were down due to difficulties sourcing raw materials. Smelters with copper ore as raw material were running at high rates since supply was sufficient and spot TC/RC was firm. From January to April, copper concentrate imports were 3.06 million mt, up 37.2% YoY. The 37.2% growth is equivalent to 200,000 mt (physical content) of copper. With scrap supply short, domestic copper smelters increased imports of anode copper. During the first four months of 2013, anode copper imports totaled 185,000 mt, up 13.16% YoY. After hitting a new low of the year in April, copper prices stabilized and fluctuated in a narrow range during May. Since scrap copper shortages did not worsen during May, overall operating rates were stable.
2) Refined Copper Inventories Fall, Spot TC/RC Up
During May, refined copper inventories at the surveyed smelters were 61,610 mt, down slightly on a MoM basis. Production cuts at some smelters eased sales pressures and high spot premiums also reduced selling pressure at low prices.
Spot TC/RC rose during May, with mainstream prices between USD 70-80/mt (cents 7.0-8.0/lbs), and higher than long-term contracts. As a result, smelters were actively purchasing ore, leaving ample copper concentrate stocks in markets. During June, spot TC/RC has remained stable. The first shipment of copper ore from Rio Tinto’s Mongolia copper mine project is scheduled to arrive in China in late June, and as a result, spot TC/RC for copper concentrate is expected to remain strong. The price spread between refined and scrap copper began to grow after copper prices stopped falling in May, helping ease tight scrap copper supplies. Overall scrap copper supply, however, should remain tight for the foreseeable future.