SMM analysis on China June copper cathode output and July forecast

In June, China's copper cathode production was 1.005 million mt, down 3,600 mt MoM, a decrease of 0.36% MoM but up 9.49% YoY, and 20,000 mt higher than the expected 985,000 mt. The production in H1 totalled 5.9183 million mt, up 359,100 mt YoY, an increase of 6.46% YoY. In June, SMM increased the coverage rate of its regular survey samples for copper cathode smelters, with the surveyed capacity rising from 13.465 million mt to 13.765 million mt.

According to SMM statistics, 8 smelters underwent maintenance in June, involving a blister copper capacity of 1.56 million mt. However, the decline was less than expected due to several factors: 1) Smelters that underwent maintenance in May gradually resumed production, increasing output; 2) Although the supply of blister copper and copper anode began to decline from late June, most smelters had already stocked up on copper anode, so the reduced supply had little impact on June production; 3) Though smelters would incur a loss of 2,211 yuan/mt when buying spot orders of copper concentrate for production, the nationwide rise in sulfuric acid prices in June partially offset the smelting losses, reducing the willingness of smelters to cut production. Consequently, the sample operating rate of the copper cathode industry in June was 86.31%, down 2.15 percentage points MoM. Specifically, the operating rate of large smelters was 89.91%, down 2.51 percentage points MoM, 81.96% for medium-sized smelters (-2.24 percentage points MoM), and 75.03% for small smelters (+5.63 percentage points MoM). The operating rate of smelters using copper concentrate was 88.6%, down 2.8 percentage points MoM, and that of those not using copper concentrate (use copper scrap or copper anode instead) was 74.8%, up 2.9 percentage points MoM.

Entering July, although 4 smelters will still undergo maintenance, according to SMM statistics, involving a blister copper capacity of 1 million mt, this is a significant reduction from the 8 smelters in June. Additionally, as idled smelters gradually resume production, total output is expected to increase, which SMM believes will be the main reason for the production increase in July. Furthermore, a smelter in Southwest China will accelerate its production ramp-up, contributing to the increase in output. However, there are also some unfavourable factors limiting the production increase. The supply of copper concentrate remains tight (as of June 28, the SMM copper concentrate index was $0.04/mt, up $1.01/mt from the previous month), and the supply of blister copper and copper anode also starts to decrease, forcing some smelters to slightly reduce production. Additionally, the hot weather in July has led some smelters to lower production efficiency, resulting in a decline in output.

Based on the scheduled production of various smelters, SMM expects domestic copper cathode production in July to be 1.0166 million mt, up 11,600 mt MoM, an increase of 1.15% MoM, and up 114,500 mt YoY, an increase of 9.8% YoY. The production in January-July is expected to total 6.9349 million mt, up 449,800 mt YoY, an increase of 6.94% YoY. The sample operating rate of the copper cathode industry in July is expected to be 87.41%, up 1.1 percentage points MoM. Specifically, the operating rate of large smelters is expected to be 92.61%, up 2.7 percentage points MoM, 80.62% for medium-sized smelters (-1.34 percentage points MoM), and 73.32% for small smelters (-1.71 percentage points MoM). The operating rate of smelters using copper concentrate is expected to be 90.7%, up 2.1 percentage points MoM, while that of those not using copper concentrate (use copper scrap or copper anode instead) is expected to be 71%, down 3.8 percentage points MoM. As the number of smelters with maintenance plans in August will further decrease and three new smelters will start production, the output in August is expected to continue to rise.