In July, China's copper cathode output was 1.0282 million mt, up 2.31% MoM (+23,200 mt) and 11.05% YoY, exceeding the expected 1.0166 million mt by 11,600 mt. The output from January to July totalled 6.9465 million mt, up 461,400 mt YoY (+7.11% YoY).
The main reasons for the higher-than-expected output in July were: 1) the faster-than-expected resumption of production at smelters that had previously reduced output; 2) a smelter in Southwest China accelerated its production, contributing to the higher-than-expected output. However, due to the significant narrowing of the price spread between copper cathode and copper scrap, many smelters faced difficulties in procuring blister copper and copper anode starting in July. This was reflected in the continuous decline in RCs for blister copper and copper anode (as of July 31, SMM blister copper RCs in South China were quoted at 1,100 yuan/mt, down 850 yuan/mt MoM; domestic copper anode RCs were 550 yuan/mt, down 450 yuan/mt MoM). Under dual unfavourable factors, the operating rate of some smelters began to decline, but the reduction was limited.
The sample operating rate of the copper cathode industry in July was 88.41%, up 2.1 percentage points MoM. Specifically, the operating rate of large smelters was 91.22%, up 1.31 percentage points MoM; that of medium smelters was 85.48%, up 3.52 percentage points MoM; and that of small smelters was 73.90%, down 1.13 percentage points MoM. The operating rate of smelters using copper concentrate was 91.7%, up 3.1 percentage points MoM; the operating rate of smelters not using copper concentrate (using copper scrap or copper anode instead) was 71.8%, down 3 percentage points MoM.
Entering August, the number of smelters with maintenance plans further decreased. According to SMM, four smelters planned maintenance, involving a blister copper capacity of 730,000 mt. Although this is a reduction from the 1 million mt capacity involved in July, the output resuming after maintenance in August also decreased compared to July; the net impact of maintenance and resumption will be a reduction of 13,000 mt. Additionally, due to the further deterioration in the supply of copper scrap and copper anode in August, more smelters were forced to reduce production (according to SMM, 11 companies reduced production, with seven primarily using copper scrap and copper anode), and the reduction was greater than in July. Furthermore, due to tight raw material supply, three smelters originally scheduled to start production in August either produced very little or delayed their start-up. These factors contributed to the decline in output in August. However, a smelter in Southwest China will continue to accelerate its production in August, bringing a significant increase in output.
Based on the scheduled production of various smelters, SMM expects domestic copper cathode output in August to be 1.0034 million mt, down 24,800 mt MoM (-2.41% MoM) but up 17,300 mt YoY (+1.46% YoY). The output from January to August is expected to be 7.9499 million mt, up 6.37% YoY (+475,800 mt). The sample operating rate of the copper cathode industry in August is expected to be 86.34%, down 2.07 percentage points MoM. Specifically, the operating rate of large smelters is expected to be 90.04%, down 1.18 percentage points MoM; that of medium smelters is expected to be 83.02%, down 2.46 percentage points MoM; and that of small smelters is expected to be 65.32%, down 8.58 percentage points MoM. The operating rate of smelters using copper concentrate is expected to be 90.2%, down 1.5 percentage points MoM; the operating rate of smelters not using copper concentrate (using copper scrap or copper anode instead) is expected to be 66.9%, down 4.9 percentage points MoM, marking a significant decline for the second consecutive month and reaching a four-month low, with further decline expected in the future. In September, the number of companies reducing production due to tight raw material supply is expected to continue increasing. However, supported by the production resumption after maintenance and the accelerated production of a certain smelter, SMM expects the output in September to continue declining, but the decline will not be significant.
