SHANGHAI, Aug 22 (SMM) – Chinese manufacturers of copper rod with scrap as feedstock operated at higher rates in July on improved price advantage of scrap materials, but weak downstream demand in a slack season kept the rates from rebounding significantly.
The average operating rate across scrap-using copper rod producers in China grew 2.91 percentage points from June to 50.71% in July, showed an SMM survey. The rate stood 11.93 percentage points higher than July 2018.
Shanghai copper prices rebounded from a low of 45,680 yuan/mt at the start of July, widening the spread between refined, scrap copper to above 1,000 yuan/mt and driving copper rod producers to scrap materials.
However, the rates across scrap-using copper rod plants grew only slightly as copper scrap traders held cargo back from the market for much of July on relatively low absolute prices of scrap.
Despite an increase of 106,200 mt in metal content of scrap imports in the first half of this year, supply remained tight for high-grade copper scrap, the feedstock to produce copper rod. This dampened the consumption of copper scrap and capped any increase in operating rates across scrap-using copper rod producers.
The operating rates are expected to decline 0.14 percentage point month on month to 50.58% in August as the price gap between refined, scrap copper again narrowed to less than 1,000 yuan/mt. But limited downside is expected in the rates as producers will guarantee production at rates around 50%. The estimate for August was some 12.03 percentage points higher than the same period last year.
Expected environmental curbs in north China’s Tianjin, Hebei areas, ahead of the National Day, will further slow operation across copper rod producers in September.