The Operating Rates of Copper Scrap Users Muted on Energy Crisis

SHANGHAI, Oct 19 (SMM) - The copper rod plants using copper scrap as the raw material have reduced the output amid tight supply of scrap and production losses. The end-users consumption has been suppressed by the global energy crisis, power rationing and rising prices of natural gas in China, pushing down the operating rates of scrap users. The market demand for copper scrap as raw materials declined, which is beneficial to the improvement of supply-demand of copper scrap. The restocking of raw materials by the copper rod plants generally declined.  Similarly, the copper alloy companies in Jiangsu and Zhejiang have lowered their operating rates or temporarily suspended production due to power rationing, which alleviated the shortage of brass copper scrap supply to some extent.

The inventory of copper scrap was at a low level amid tight supply, and is expected to decline further. In addition, the customs strictly inspects the imports of raw materials for secondary copper/brass, resulting in higher possibilities of sampling inspections and returns. And the prices of imported raw materials have also been higher than the domestic prices as a result. Therefore, the imports of raw materials for secondary copper and other products are restrained further. The overall supply of copper scrap is hardly to improve. Meanwhile, the prices spread between copper cathode and copper scrap, and that between copper rods using copper scrap and using copper cathode rose sharply as copper prices soared over the weekend. There is arbitrage space for traders, and the downstream producers prefer cheaper copper rods produced with copper scrap when purchasing on rigid demand, supporting the consumption of bare bright copper. If the price spread does not narrow in the short term, the supply and demand of copper scrap will tighten.