SHANGHAI, Sep 27 (SMM) - From September 19 to 25, the copper scrap throughput in East China Nonferrous Metals City was about 29,400 mt, a week-on-week increase of 18.88%. According to SMM price, the weekly average price of SMM #1 copper cathode was 63,224 yuan/mt from September 19 to 22, a drop of 24 yuan/mt, and the price fluctuated narrowly. The weekly average price of bare bright copper in Linyi Metal City in Shandong province was 57,920 yuan/mt, almost flat from the previous week. The domestic weekly average spread between copper cathode and scrap stood at 833 yuan/mt, narrowing 308 yuan/mt compared with a week ago.
The weekly copper scrap throughput kept rising mainly for three reasons:
1) As the National Day holiday is approaching, the downstream gradually started pre-holiday stocking, hence the copper scrap market was active in trading, elevating the overall throughput.
2) Last week, the SHFE 2210 copper contract fluctuated around 63,000 yuan/mt. The scrap sellers were generally bearish over copper prices in light of downside risks on the macro front, and were eager to sell when the prices were still high.
3) According to SMM research, the premiums of secondary copper rod over SHFE front-month contract was 290 yuan/mt in Jiangxi; while the premiums of electricity rod in east China was 1,110 yuan/mt. The spread between copper cathode and scrap narrowed to 820 yuan/mt due to falling copper prices, but it still favoured copper scrap consumption. Meanwhile, in the context of an increase in the operating rates of downstream engineering and infrastructure projects amid cooling weathers, there are temporary advantages concerning the new orders for secondary copper rods.
Looking forward to this week (September 26-September 30), the SHFE 2210 copper contract fell below 61,000 yuan/mt at the beginning of this week, a sharp drop of nearly 2,000 yuan/mt, which discouraged the scrap sellers, hence the market transactions are relatively thin. Then, with the weakening of market restocking sentiment, most copper scrap suppliers will enter the holiday rhythm.
Also according to SMM research, the premiums of secondary copper rod over SHFE front-month contract stood at 615 yuan/mt in Jiangxi province, while the spread between copper cathode and scrap narrowed to 695 yuan/mt. The cost efficiency of scrap has dropped palpably, weighing on new orders. Therefore, the operating rates of secondary copper rod are likely to remain flat or fall slightly this week without much upside room. SMM predicts that the throughput of copper scrap in Linyi Metal City will decline this week and return to the level of around 20,000 mt.