China Requires Payment for Delinquent VAT, Copper Rod Plants Using Copper Scrap In Some Areas Cautious In Production

The operating rates of copper rod plants using copper scrap were 48.96% between June 26 and June 30, a drop of 0.61 percentage point from a week earlier, according to SMM survey of 15 plants with a capacity of 1.48 million mt/year). The supply of copper scrap last week was no longer the main factor restricting the production of copper rod produced with copper scrap.

Most plants had adequate stocks to meet production. The main reason limiting the recovery of the operating rates was still consumption. Some copper plants using copper scrap as raw material turned to produce copper anode plates as the price spread between copper cathode and copper scrap remained favourable for scrap users. In this scenario, the operating rates of copper rod plants using copper scrap as raw material dropped. As China required payment for delinquent value-added tax (VAT), some copper rod plants using copper scrap turned cautious in purchasing, production and sales, mainly purchasing according to sales.

As of last Friday, copper rod produced with copper scrap in Jiangxi was quoted with a discount of 620 yuan/mt against SHFE front-month copper contract prices. Electric copper rod in east China was quoted with premiums of 910 yuan/mt over the contract, with a price spread of 1,530 yuan/mt between copper rod produced with copper cathode and copper rod produced with copper scrap. Despite a larger price spread between copper cathode and copper scrap, the off-season and the high copper prices weakened the consumption of copper rod produced with copper scrap.