SHANGHAI, Jul 7 (SMM) – The most-traded SHFE copper contract fell below the 68,000 yuan/mt market and consolidated around 67,000 yuan/mt as of this Wednesday July 6, down 5,850 yuan/mt or 9.22% from the previous Wednesday. Demand in the lithium-battery copper foil sector picked up entering July, and the conversion margins stopped falling and stabilised. As it is widely known that the copper foil price is set based on copper price and the conversion margin. Therefore, theoretically, the volatility of copper prices shall have little impact on the conversion margins of copper foil companies. But is it really the truth? SMM will present a detailed prospective into this issue.
Downstream lithium battery companies as well as copper-clad plate enterprise restocked on dips before copper prices slumped, and turned wait-and-see and relied mainly on their in-plant stocks after copper prices posted constant plunges. In this case, a number copper foil companies have been challenged by overstocking of finished products.
In details, a few lithium battery companies picked up goods as scheduled in order to deliver their orders in time despite slumping copper prices putting buyers on the sidelines. In the case of wrestling between seller and buyers, lithium-battery copper foil companies, the seller, carried weaker bargaining power in light of supply surplus, and will have to lower the prices to digest the finished products and ensure smooth cash flows. As such, it is expected that the conversion margins of 6μm and 8μm lithium-battery copper foil will be lowered by 500-1,000 yuan/mt this week.
In terms of standard copper foil, the electronics market remains muted in July, and 50% of the application markets of PCB are haunted by low climate index. When the sluggishness in the terminal market in transmitted to the mid and upstream, the conversion margins of copper foil like HTE are likely to drop, forming negative feedback across the chain. Most standard copper foil companies have cut the production by 30-50% amid high financial pressure, slumping copper prices and poor sales. It is expected that the conversion margins of 18, 35 and 70μm HTE copper foil will drop 1,000 yuan/mt this week in order to digest the high finished product inventory, with potentials of further declines.