According to SMM survey, the operating rates of copper rod makers using copper scrap averaged 47.56% in August, up 4.54 percentage points month on month and up 3.1 percentage points year on year. (Notes: SMM surveyed 43 producers with a combined capacity of 3.83 million mt/year.) The overall copper scrap supply was tight in August. At the beginning of the month, copper prices hovered at a high level on the back of China's macroeconomic policies, driving traders of copper scrap to sell aggressively. That ensured adequate supply of copper scrap for most copper rod plants using copper scrap as raw material.

The then falling copper prices prompted suppliers of copper scrap to hold onto their cargoes until mid-August, significantly reducing available copper scrap. The raw material inventory of copper rod plants using copper scrap as raw material plunged and could only eke out normal production. As copper prices began to rebound in late August, the supply of copper scrap gradually increased, and the inventory of copper rod plants using copper scrap as raw material returned to safe levels.

The raw material inventory/output ratio in August stood at 10.21%, down 1.34 percentage points month on month. On the consumption side, traders actively placed orders when prices were high, increasing outstanding orders rapidly at copper rod plants using copper scrap as raw material. When copper prices fell back from high levels, downstream buyers purchased aggressively and traders also took delivery, boosting demand for spot copper rod produced with copper scrap. Available spot cargoes thus tightened in the middle of the month. While demand for spot cargoes weakened at the end of the month due to the rally in copper prices, there were still outstanding orders at copper rod plants using copper scrap as raw material. Therefore, the operating rates recorded a huge rebound in August. According to SMM survey, some plants still had 500-600 mt of orders to be delivered by the end of the month.

Average operating rate estimated at 48.55% in September

Operating rates at copper rod producers using copper scrap are estimated at 48.55% in September, up 0.99 percentage point from the previous month. China’s favourable real estate policies issued in August are expected to affect the upstream industries with a lag, and most wire and cable plants have reduced cost this year, keeping inventories at low levels. As such, any growth in operating rates of copper rod plants using copper scrap as raw material will be insignificant in September despite the peak season.