From the comparison of copper inventory data from 2019 to 2024: SMM copper inventory after the New Year's Day holiday this year only increased by 5,200 mt to 71,600 mt. Compared with previous years, both the increased inventory quantity and the current total inventory are at historically low levels. The current inventory is 71,600 mt, which is the lowest level in 14 years.
SMM expect supply and demand to increase this week. And inventory would fall marginally.
According to SMM research, as of Monday, January 2, copper inventories in mainstream regions across China increased by 5,200 mt from last Friday to 71,600 mt. Compared with last Friday's data, the inventories across China increased. The total inventory is 37,700 mt lower than the 109,300 mt in the same period last year. Inventories in Shanghai increased by 2,800 mt from last Friday to 52,200 mt. The arrivals of imported copper increased during New Year's Day holiday, and the arrivals of domestic copper also increased. This is the main reason for the increase in inventories in East China. Inventories in Guangdong increased by 1,700 mt to 10,700 mt. Guangdong's downstream consumption has weakened recently, which is also reflected in the continued decline in Guangdong's average daily shipments. In addition, smelters’ shipments also increased during New Year's Day holiday.
SMM understands that the arrival volume of imported copper will continue to increase after the holiday, and the arrival volume of domestic copper is expected to be little changed. The total supply is expected to increase from last week. On the downstream side, corporate funds are no longer tight after New Year's Day, and purchasing volume has increased compared with last week. Therefore, SMM expects supply and demand to increase this week, and inventory is likely to fall slightly.
It can be seen from the changes in copper inventory data around New Year's Day in 2019-2024 that the increase in copper inventory around New Year's Day in 2024 is the lowest in six years, and the total inventory is also at a six-year low. According to SMM historical data, the copper inventory of 71,600 mt in mainstream markets is at the lowest level in 14 years.
Demand: SMM expects copper semis operating rate to decrease month-on-month and increase year-on-year in December
According to SMM research, on the first trading day after the holiday, the spot premium was high before falling. Downstream purchasing was weak, mainly using early inventory and cargoes purchased under long-term orders to maintain production operations. As of 11 a.m. January 2, mainstream standard-quality copper was quoted at a premium of 240-250 yuan/mt and some transactions were made. High-quality copper was also lowered to a premium of 250 yuan/mt. There were fewer offers for hydro-copper. The premium rose as expected on January 2nd, and the trading sentiment in the spot market was weak. Due to the cost of goods during the holiday, sellers raised prices in morning trading.
The operating rates of each copper semis processing sector in December are estimated as follows: copper plate/sheet and strip (79.43%)> copper tube (71.04%)> copper rod produced with copper cathode (70.12%). The average operating rate in the overall copper semis industry is expected to fall to 71.99%, down 2.1 percentage points MoM, but up 6.46 percentage points YoY. Significantly lower operating rates of copper rod plants using copper cathode as raw material will be the main reason for the decline in operating rates of the copper semis industry, as the operating rates of the other two sectors will rise slightly. Although the operating rate of the copper semis industry has declined month-on-month, it has increased year-on-year, which also means that copper consumption in December 2023 is better than that in December 2022.
Supply: It is expected that the output of copper cathode will increase in December and the quantity of imported copper may decrease
In December, according to SMM statistics, only one smelter has overhaul plan. In addition, the smelters that were overhauled in November will resume production. Many smelters reported that the supply of blister copper in December was better than that in November. Total production in December will increase compared with November. However, several newly-commissioned smelters were unable to produce copper cathode, and it is estimated that they will not be able to produce output until January, which will result in lower-than-expected output in December. Domestic copper cathode output is estimated at 1 million mt in December, up 43,700 mt or 4.55% month-on-month and 15.5% year-on-year, according to the current production schedules.
According to data from the General Administration of Customs, China's copper cathode imports in November were 378,791 mt, a month-on-month increase of 13.48% and a year-on-year increase of 5.71%. According to SMM research, the amount of imported copper may decrease in December.
In short, from the perspective of supply and demand: the supply output of copper cathode in December is expected to increase year-on-month, which may grow copper inventories. However, the quantity of imported copper may decrease and the operating rate of copper semis will increase year-on-year, which will in turn keep copper inventories at lows. In the future, SMM will continue to follow the changes in supply and demand that affect copper inventories.
