The traditional peak season for copper rod made of copper cathode is about to set in. To what extent did the surge in copper prices affect the inventory levels and production and sales of copper rod plants using copper cathode as raw material? What are the consumption expectations after Qingming Festival? The following is a summary analysis based on recent actual survey results:
According to SMM research, after the Chinese New Year holiday, the recovery of consumption of copper rod made of copper cathode has been lower than the expectations. Entering March, the operating rate of copper rod plants using copper cathode as raw material gradually approached the pre-holiday level. However, affected by the news of smelters production cuts and expectations of future supply shortages, copper prices continued to rise and eventually remained above 72,000 yuan/ton. The high copper prices further suppressed the slow recovery of downstream consumption. The new orders of copper rod plants using copper cathode as raw material dropped sharply.
In terms of inventory, serious inventory accumulation appeared since the first week of March (Mar 1-7). The finished product inventory of 21 sample enterprises in the first week of March increased by 15.06 percentage points on the week, recording 66,450 tons. Downstream recovery after the holiday was slow and there were funding problems. At the same time, some companies pursued a "good start” and maintained high production, resulting in a substantial increase in finished product inventory. Copper prices surged at the end of the second week of March (Mar 8-14), causing a sharp drop in new orders. As most companies controlled inventory and slightly reduced production, finished product inventories continued to increase and remained above 64,000 tons for the following three weeks.
The raw material inventory was not consumed as expected only in the first week of March due to the impact of copper prices. In addition, some companies were bullish on the future market and replenished their inventories. The raw material inventory increased significantly to 49,000 tons, and then gradually decreased with the decrease in orders and operating rates. Only in the first week of April (Mar 29-Apr 4) did it rebound slightly due to the stockpiling plan before the Qingming Festival.
Since the copper price surged, the operating rate of copper rod plants using copper cathode as raw material has turned downward. But as the enterprises that had reduced production and stopped production due to the suppression of copper prices resumed production, and supported by long-term orders and demand from downstream, orders have gradually recovered in small quantities. The operating rate of copper rod plants using copper cathode as raw material has also rebounded accordingly. According to a survey of copper rod plants using copper cathode as raw material before the Qingming Festival, companies generally expected production to remain stable in the first week after the Qingming Festival (Apr 5-11). Some companies had plans to reduce production and overhaul before the Qingming Festival, which led to an increase in the operating rate after the Qingming Festival, driving the operating rate to maintain an upward trend this week (Apr 5-11). It is expected that the operating rate this week will reach 74.48%. However, most companies are pessimistic or cautious about the actual consumption situation after the holiday. Whether there will be a significant increase in orders after the holiday still depends on the trend of copper prices.
At present, concerns over tight copper supply linger. Relevant data such as the US labor force and inflation may provide more support for the Fed's interest rate cut. Crude oil prices remain high. SHFE copper prices may rise again under the guidance of LME copper. Therefore, although the operating rate of copper rod plants using copper cathode as raw material is expected to increase after the holiday, it is difficult to see any bright spots in actual consumption. The current orders of downstream cable companies are mainly from rail transit sector, while the recovery of orders for dealer stores, civil lines, infrastructure projects, etc. are relatively pessimistic.
