SHANGHAI, Feb 23 (SMM) – The most-traded SHFE 2104 copper contract opened higher yesterday. SHFE copper once rushed to a high of 67,370 yuan/mt, and then hit a new high since September 2011. Since the opening of the market after the CNY, SHFE copper has risen by more than 5,500 yuan/mt in only three trading days, and it has risen by more than 10,000 yuan/mt from the low of 56,870 yuan/mt on February 3. Under the continuous unilateral rise in the market, operating rates of copper processing enterprises were far lower than expectations, with few new orders.

SMM surveyed some copper rod processing companies. It is understood that most companies have basically resumed production. However, operating rates were low due to the surge in the market. Refined copper rod companies have limited stocks of raw materials and finished products before, and most of them purchased and restocked in advance according to actual orders. At present, the orders in production are basically based on the scheduled production and orders under long-term contracts. Companies dared not produce blindly at high prices. Company A (downstream mainly producing enameled wire) reported to us that nearly 40% of stockpiling raw materials have been consumed before, and the orders on hand are only about half a month. Operating rates this month were not as high as expectations, and it is expected to drop by more than 13% year on year. Company B (mainly producing wires and cables in the downstream) said that the downstream basically resumed production, while the new orders were indeed very limited. With such a large and rapid rise in the market, most downstream companies are in a wait-and-see state.

The recent sharp rise in global commodities, the post-pandemic era market’s optimistic expectations for future economic recovery, increased inflation concerns, and financial attributes all contributed to the surge in copper prices. In the survey, companies also said that the current surge in copper prices widened the deviation from the fundamentals. As time goes by, once the funds leave the market, there is concern about a sharp decline. Companies are waiting for an opportunity for a market correction, which is also an important reason why most companies are cautiously placing orders and staying on the sidelines.

SMM will continue to monitor the trend of copper processing materials, and timely feedback the real situation to the market.