Copper cathode
SMM data showed that in January, China's copper cathode output was 969,800 mt, a month-on-month decrease of 29,600 mt or 2.96%, but a year-on-year increase of 13.65% or 116,500 mt; the output is 16,200 mt higher than the expected 953,600 mt.
There are several reasons for the month-on-month decrease in output in January: 1. The statistical cycle factor resulted in a decrease in output. There were fewer days in January (the statistical period of some enterprises is January 1-25, which is about 5 days less than in normal months); 2. A smelter in south-west China began to relocate, causing its output to drop significantly; 3. Two smelters have undertaken maintenance operations; 4. Some smelters experienced a slight drop in output due to tight supply of blister copper. The reasons for the higher-than-expected output include: 1. Two newly-commissioned smelters have begun to release output, and the new output is not low; 2. Some smelters have requirements for a good start for the new year, and their output in January exceeded the original plans; 3. The operating rates of some smelters will drop during the Chinese New Year holidays, and the operating rate was increased in January to make up for the output reduction in February. We believe that the average operating rate of copper cathode industry fell 3.95 percentage points month on month to 85.18% in January.
In February, two smelters have maintenance plans, and many smelters have lowered their operating rates due to the Chinese New Year holidays. These factors will lead to a decline in production in February. As of February 2, the SMM imported copper concentrate index (weekly) reported $22.08/mt, a decrease of $5.86/mt from $27.94/mt in the previous week. Smelters purchased spot copper concentrate for production and currently run at a loss of 894 yuan/mt. SMM understood that some smelters advanced maintenance time in the face of ultra-low spot TCs for copper concentrates. There are also some smelters that are planning to reduce the grade and amount of copper concentrate feed while ensuring normal production. However, due to the time lag (it takes some time from input to output), the output of these smelters that reduced the amount of raw material feed will not be affected in February, and the output reduction is expected to occur in March.
Based on the production schedules of various companies, SMM estimates that domestic copper cathode production in February will be 959,400 mt, a month-on-month decrease of 10,400 mt or 1.07%, and a year-on-year increase of 51,600 mt or 5.68%. The accumulated output from January to February is expected to stand at 1.93 million mt, a year-on-year increase of 9.55% or 168,100 mt.
