In 2024, copper ore supply shortage, coupled with the expectation of concentrated maintenance of copper smelters in the second quarter and many favorable macro factors, drove copper prices to start a strong upward trend. On April 30, the most active SHFE copper contract hit a new high since May 17, 2006 at 82,460 yuan/ton. As of the close of May 8, the year-to-date increase was as high as 15.33%.
The SMM average price of 1# copper cathode was 81710 yuan/mt as of April 30, with an YTD increase of 15.2% as of May 8.
High copper prices hinder downstream operations
The average operating rate of copper semis plants stood at 69.82% in March, up 30 percentage points month-on-month but down 6.83 percentage points year-on-year, according to an SMM survey. Driven by orders from home appliances, new energy vehicles and new energy power generation, the operating rate of copper tubes and copper plates and strips performed well. However, due to the impact of high copper prices and the widening price spread between copper cathode and copper scrap, the operating rate of copper rod plants using copper cathode as raw material has recovered only slightly.
The overall operating rate of the copper semis industry in April has not been released. The operating rates of the downstream segments surveyed by SMM are as follows:
Operating rate of wire and cable enterprises fell 13.73 percentage points year on year in April
The operating rates of copper wire and cable enterprises stood at 73.42% in April, up 2.51 percentage points month on month but down 13.73 percentage points year on year, according to the latest SMM survey of 64 plants with a combined capacity of 3.64 million mt/year. The rate was 1.83 percentage points lower than expected. The average operating rate of large, medium-sized and small enterprises was 78.23%, 57.90% and 42.67% respectively.
In April, copper prices hit new highs, which significantly suppressed the growth of new orders for cable companies. Companies with stable production mostly relied on previously won orders to maintain production. Although downstream demand has recovered overall compared to March, the growth of demand has been suppressed by high copper prices, and the increase is relatively limited. By industry, in April, companies mostly relied on existing orders from State Grid, photovoltaics, wind power and rail transit; companies said that orders from medium and low voltage sectors remained weak.
Operating rates at China's copper rod plants using copper cathode as raw material to have dropped sharply in the week of April 26-May 2:
The average operating rate of large and medium copper rod plants using copper scrap as raw material stood at 70.68% in the week before the Labour Day holiday, up 0.93 percentage point from a week earlier but down 7.79 percentage points year-on-year, according to an SMM survey. （Notes: SMM surveyed 21 producers with a total production capacity of 7.83 million mt).
Most copper rod plants using copper cathode as raw material in South China that closed for holidays restocked in the week before the holiday, driving the overall operating rate to rise. However, the operating rates of most copper rod companies changed little, and they continued with maintenance or production cuts. Other large companies began to reduce production lines. If the impact of additional restocking was excluded, the operating rate of copper rod plants using copper cathode as raw material in the week before the holiday should have continued to decline. The operating rate in the week of April 22-28, 2023 was 78.65%. It can be seen that despite the traditional peak season, the current operating rate is far below the normal level.
Inventories at some large plants dropped sharply thanks to increased downstream delivery-taking when copper prices fell, with finished product inventory in the week before the Labour Day holiday falling 1.02% to 68200 mt. The raw material inventory fell by 3.86% to 39800 mt. As the Labour Day holiday approached, many copper rod plants using copper cathode as raw material undertook maintenance to reduce inventory. At the same time, the price spread between copper rod using copper cathode and using copper scrap remained above 2,000 yuan/ton, and the consumption of copper rod made of copper cathode has been under increasing pressure. It is expected that the operating rate of copper rod plants using copper cathode as raw material should have dropped sharply to 62% in the week from April 26 to May 2.
Copper billet enterprise operating rate: 61.93% in March and expected to be 56.83% in April
According to SMM survey on April 11, the operating rates of brass billet producers averaged 61.93% in March, higher than expected, and are expected to be 56.83% in April. In March, the copper billet market had strong orders as downstream companies replenished their inventories after the CNY holidays. In addition, the refrigeration and power industries performed well, which led to a significant increase in the operating rate. The average operating rates of large, medium-sized and small enterprises stood at 55.15%, 61.07%, and 57.09% respectively. The survey covered 56 producers with annual production capacity totalling 2.25 million mt. The average operating rate is expected to stand at 50.35% in May, down 5.1 percentage points on the month.
Copper cathode prices surged again in early April, reaching a two-year high, which dealt a heavy blow to market demand. Copper billet companies said that orders were significantly reduced they were more worried about the future trend of copper prices. According to companies, the orders from traditional industries such as plumbing valves and sanitary ware products have also shrunk due to the poor performance of the real estate market. Orders came more from overseas, especially in Southeast Asia and Europe, while domestic demand is mainly supported by new energy vehicles and refrigeration accessories. Most companies said that stable copper prices will help restore stability in orders.
Enameled wire enterprise operating rate: 74.41% in March and expected to be 71.83% in April
The operating rates of enamelled wire producers averaged 74.41% in March, up 29.3 percentage points month-on-month but down 3.55 percentage points year-on-year, SMM survey showed. The figure was 4.72 percentage points higher than expected. The average operating rate of large, medium-sized and small enterprises was 79.64%, 67.82% and 60.50% respectively. Note: The survey covers 45 producers with a total production capacity of 2.008 million mt.
With no significant growth in total downstream demand and increasingly fierce competition among enterprises, the market share that enterprises get is getting smaller and smaller. In addition, copper prices hit new highs in March, which significantly suppressed the growth of new orders. The traditional peak season was only felt by several large factories, and most small and medium-sized enterprises are not optimistic. Orders from home appliances and new energy vehicles sectors were relatively optimistic in March, with some leading companies reporting that their production in March increased by 5-10% year-on-year. Orders for flat wires used in transformers were also very optimistic, while orders from traditional motors, electronics and other industries did not show any impressive performance.
SMM expects the average operating rate to drop 2.58 percentage points month on month and 3.19 percentage points year on year to 71.83% in April. The current copper price has exceeded 80000 yuan/mt, further slowing down the delivery-taking speed by end-user companies. There are very few trades in the market, undermining confidence about the growth of new orders and production in April. It is only heard that orders from home appliances and new energy vehicles from some large companies can still remain stable. In addition, many companies expressed concerns that the process of replacing copper with aluminium will accelerate under high copper prices. This may affect the orders of copper enamelled wire in the long run.
Copper deficiency? Lack of ore ≠ lack of copper!
Affected by overseas mine disturbances, overseas copper ore supply has tightened, which is the main reason for the recent continued surge in copper prices. But is there really a shortage of copper in China? First of all, we need to know that copper raw materials not only refer to copper ore, but also copper cathode and secondary copper.
Copper Supply Status
Copper scrap imports：
According to data from the General Administration of Customs, China imported 557,000 tons of copper scrap in the first quarter, a year-on-year increase of 15.8%. In March, the import volume of copper scrap reached 218,200 tons, setting a record high since December 2018. The surge in copper scrap imports is undoubtedly a reflection of Chinese smelters replenishing raw materials amid tight global copper concentrate supply.
China copper scrap output：
According to SMM data, China's domestic copper scrap production in the first quarter was 255,400 tons, a decrease of 17.2% year-on-year . The main reason for the reduction in copper scrap production is that since February, the price spread between copper cathode and copper scrap has widened rapidly, reaching 4,400 yuan/ton on April 30, the highest point since SMM began recording in 2013. That boosted copper scrap consumption; at the same time, copper rod plants using copper scrap switched to producing copper anode, and the supply of copper anode made from copper scrap increased. Due to the continued high copper prices, SMM expects domestic copper scrap production to rebound to around 98,000 tons in April.
Copper ore supply
According to data from the General Administration of Customs, China’s import volume of copper ore and concentrate in the first quarter was 6.988 million tons, a year-on-year increase of 5.1%. In March, China imported 2.33 million tons of copper concentrate and its ore, a month-on-month increase of 5.9% and a year-on-year increase of 15.3%. Most of the increase in copper concentrate imports came from Kazakhstan, Mexico, Serbia, Congo (DRC), and Russian Federation. It can be seen that in addition to major copper producing countries such as Chile and Peru, China has been expanding other import channels.
Copper anode supply
According to data from the General Administration of Customs, China's copper anode imports in the first quarter were 254,000 tons, a year-on-year decrease of 17.24% from the first quarter of 2023. Although imports have decreased, the supply of domestic copper anode market has tended to be ample recently.
According to the latest survey by SMM, the copper anode market in south China turned ample in April. The processing fees rebounded accordingly, mainly due to a surge in supply. The previously delayed shipments of imported cargoes arrived and China’s copper anode imports surged. But available spot cargoes are still scarce, muting trades; since mid-to-late March, the price spread between copper cathode and copper scrap has continued to widen, and the overall supply of copper scrap has increased, gradually leading to an increase in the output of copper anode made from copper scrap. In addition, according to SMM prices, the average monthly deduction for 8mm rods meeting national standards in Jiangxi Province was about 1,800 yuan/ton from SHFE copper prices in April, while the average monthly processing fee for anode plates was 970 yuan/ton in April, which translated into a profit difference of 830 yuan/ton. This, combined with the lower production cost and shorter account period of anode plates, drove copper rod plants using copper scrap as raw material to turn to the production of anode plates, which has also led to a rapid increase in market supply. However, due to the tight supply of copper concentrate raw materials, supply in north China has not shown any signs of easing.
It is expected that in May, the RCs of blister copper and anode plates in the south will continue to rise. With the large increase in supply, the inventory of smelters has increased. Some have limited purchases and significantly increased the processing fees. It is expected that the supply in south China will be ample in May. 》 Click for details
Imports of unwrought copper and copper semis
According to data from the General Administration of Customs, China’s import volume of unwrought copper and copper semis in the first quarter was 1.375 million tons, a year-on-year increase of 6.9%.
China copper cathode production：
According to SMM data, China's cumulative copper cathode output from January to April this year was 3.9047 million tons, an increase of 222,200 tons or 6.03% year-on-year. Copper cathode production in April was 985,100 tons, a month-on-month decrease of 14,400 tons or 1.44%, a year-on-year increase of 1.56%, and an increase of 20,100 tons from the expected 965,000 tons. The month-on-month decline in output in April was due to maintenance at seven smelters, but the decline was not as large as expected. Entering May, more smelters will undergo maintenance. According to various production schedules, SMM predicts that domestic copper cathode output in May will be 977,100 tons, a month-on-month decrease of 0.81% and a year-on-year increase of 1.91%. The output is expected to total 4.88 million mt from January to May, up 5.18% year-on-year. Some smelters will undergo maintenance in June, and domestic copper production is expected to decline.
Domestic copper stocks remain high
Domestic copper inventories have increased significantly this year and have continued to remain at a high level recently. According to SMM data, on May 6, the total domestic social inventory of copper cathode was 404,700 tons, setting a new high since April 10, 2020, and was only 167,400 tons in the same period last year.
According to SMM research and estimates, the overall supply in the copper market was in a state of substantial surplus in the first quarter.
At present, there is no overall shortage of domestic copper raw material supply.
Domestic supply is expected to decrease as smelters are exporting. However, as delivery is approaching and the spot discount is large, smelters are expected to increase the amount sent to warehouses. Imported copper has also arrived recently, so SMM expects the total supply to increase this week but the increase will not be large.
In terms of consumption, downstream consumption showed a seasonal recovery trend after the Chinese New Year holiday, but under the high copper prices, the operating rates of downstream enterprises generally fell year-on-year. Therefore, SMM believes that inventories will continue to increase this week amid increased supply and poor consumption.
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