Operating rates at scrap-using copper rod producers fall for 3 consecutive months

SHANGHAI, Feb 21 (SMM) – Operating rates across Chinese manufacturers that produce copper rods with copper scrap fell 4.52 percentage points from a month earlier to stand at 50.31% in January, marking the third straight month of declines, an SMM survey showed.

Most plants shut for the Lunar New Year holidays between January 31 and February 11, and some began to undertake annual maintenance 3-5 days ahead of the holidays. Such fewer working days lowered production for January.

Output at a plant in Jiangxi, with annual capacity of 120,000 mt, halved last month, and this lowered operating rates across large scrap-using copper rod producers included in the SMM survey by over 15 percentage points.

Shanghai copper prices hovered in a wide range at lows in January and the price spreads between copper cathode and copper scrap continued to stand below 1,000 yuan/mt, with the monthly average at 637 yuan/mt and the lowest at 361 yuan/mt, SMM assessments showed.

Capacity utilisation rates at copper rod producers who use copper scrap as feedstock are low in China as stricter grips over copper scrap imports and environmental limitations pressured producers. Some plants suspended or turned to copper cathode.

Operating rates are expected to fall 14.31 percentage points from January to stand at 36% in February as the holidays sharply reduced working days. Limited copper scrap supplies would also affect production as scrap suppliers have yet to fully recover from holidays.

Gains in Shanghai copper prices after the Lunar New Year break widened the spreads between copper cathode and copper scrap, which stood at 1,510 yuan/mt as of Wednesday February 20, SMM assessments showed.

As the copper scrap market fully recovered after the middle of the first Lunar month, consumption of copper scrap is set to improve.

Thirteen scrap-using copper rod producers participated in the SMM survey for January, with overall capacity coming in at 890,000 mt. This was 170,000 mt less than the survey for previous months as four plants were excluded after they suspended or shifted to using copper cathode.