SMM Analysis: Copper prices fell, and the price difference between primary metal and scrap narrowed significantly. The operating rate of copper cathode rod in China rebounded as expected in July.

According to the SMM survey data, the operating rate of copper cathode rod enterprises in July was 70.52%, achieving a better-than-expected recovery, up 3.96 percentage points MoM, and 1.95 percentage points higher than the expected value, with a slight YoY increase of 0.05 percentage points. Among them, the operating rate of large enterprises was 79.62%, medium-sized enterprises 56.37%, and small enterprises 59.92%. (Surveyed enterprises: 61, capacity: 13.877 million mt)

The operating rate of the copper cathode rod industry in July recorded 70.52%, a slight YoY increase of 0.05 percentage points (the operating rate in June last year was 70.47%).

In July, copper prices continued to decline. According to SMM data, the average price of SMM #1 copper cathode in July decreased by 1,977.71 yuan/mt MoM. The price difference between primary metal and scrap also continued to narrow. According to SMM statistics, the average price spread between secondary copper rod in Jiangxi and copper rod for power use in east China in July was 719 yuan/mt, down 254 yuan/mt MoM. During the month, the price difference between primary and secondary copper rods once narrowed to 325 yuan/mt. As copper prices continued to fall, downstream orders were further released, and the price difference between primary metal and scrap gradually narrowed, leading to more orders returning to copper cathode rods. Most copper cathode rod makers saw an improvement in overall orders in July compared to June, and their operating rates also increased accordingly. In addition, besides the consumption boost brought by the decline in copper prices and the narrowing price difference between primary metal and scrap, the operating rates of secondary copper rod makers have been declining since the implementation of the Fair Competition Review Regulations. Some companies also reported a shift in orders.

The raw material inventory/output ratio for copper cathode rod makers was 6.92% in July, and the finished product inventory/output ratio for copper cathode rod makers was 11.53% in June.

With the premiums remaining firm, the raw material inventories of copper cathode rod makers slightly decreased by 1.19 percentage points, and the finished product inventories of copper cathode rod makers also slightly decreased by 1 percentage point as overall consumption improved.

The operating rate of copper cathode rod enterprises is expected to be 72.71% in August.

Entering August, concerns about economic recession intensified, and copper prices continued to decline. Most copper cathode rod makers expected production and sales to further improve. However, due to the continuous drop in copper prices, downstream buyers remained cautious, and their purchasing desire gradually weakened. Meanwhile, although many secondary copper rod plants have halted production, the increase in orders for copper cathode rod makers mainly came from returning orders due to the narrowing price spread, with few new customers. Additionally, the traditional off-season for enamelled wire in August might lead to a reduction in orders. Therefore, it is expected that the operating rate of copper cathode rod makers will only slightly increase to 72.71% in August.