[SMM Analysis] Guangdong Electric Copper inventory is nearly halved, how to deduce in the future

SMM4, March 15: as of April 15, according to the latest statistics of our SMM, the electrolytic copper inventory in Guangdong has dropped sharply to 66575 tons, down 52778 tons from the peak of 119300 tons during the year, and more than 6, 000 tons lower than the 72600 tons in the same period last year. (see figure below for details of the trend)

Why is there such a roller coaster? We analyze the following reasons:

Supply side:

Demand side:

2. The substitution effect of electrolytic copper rod is obvious. It is understood that since the beginning of this year, waste copper rod enterprises have reduced or even stopped production one after another because of raw material problems. Even if there is output, the processing fee of copper rod has been maintained at a high level. Recently, the processing fee of waste copper rod is higher than that of electrolytic copper rod. (April 13 8mm scrap copper rod processing fee reported 600 yuan / ton, domestic 8mm electrolytic copper rod processing fee reported 570 yuan / ton, detailed data see the following chart), resulting in unsalable products. This is also one of the important reasons for the hot sales of electrolytic copper rods in the near future. According to our latest research, the operating rate of scrap copper rod enterprises in Guangdong is only about 10%, and the amount of electrolytic copper rod replacing waste copper rod has increased by about 25000 tons per month. If we add in the amount of waste copper rod that is difficult to go south in Jiangxi, we expect it to reach 35000 tons per month.

Overall, the main reason for the recent rapid decline in electrolytic copper stocks in Guangdong is a reduction in supply and a sharp increase in demand.

Looking to the future: we believe that Guangdong electrolytic copper inventory will continue to decline, because: the supply will not increase significantly in a short period of time; demand will remain high, electrolytic copper rod enterprises will continue to benefit from the large-scale reduction of production and shutdown of scrap copper rod enterprises, cable enterprises will have a good inventory in the near future, whether from the power grid, municipal or dealer orders have increased significantly than before, and there is still room to rise in the future. It is worrying that many copper pipe enterprises said that with the export of air conditioning enterprises blocked domestic sales, it is expected that from the end of the month and the beginning of the month, the order volume will begin to decline, and some air conditioning enterprises even expect the monthly order volume to decline about the month.

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