Copper Billet Operating Rate Continued to Rise in August with Optimistic Market Expectations for September [SMM Analysis]

According to the SMM survey, the operating rate of copper billet producers in August 2024 was 50.56%, up 3.13 percentage points MoM. Specifically, the operating rate of large enterprises was 52.93%, medium-sized enterprises 46.76%, and small enterprises 44.97% (Surveyed enterprises: 56, capacity: 2.25 million mt).

The operating rate of copper billet producers in August increased again as the market expected, with the growth slightly exceeding expectations. The performance of the copper billet market in August was mixed. The increase in the operating rate was mainly due to a rise in orders for extruded billets. According to SMM, most extruded billet producers stated that the increased orders were due to seasonal recovery and the decline in copper prices, leading many downstream buyers to restock at lower prices. Additionally, favorable processing fees also boosted orders for large enterprises. In contrast, the continuous casting billet market saw a significant decline as the refrigeration industry entered the off-season. Large enterprises maintained stable production relying on price discounts, while small enterprises saw a decrease in operating rates.

On the raw material front, according to copper billet producers and traders, recent customs inspections have been stringent. Additionally, the quality of brass scrap from Europe has been lower than that from the Americas, leading to frequent returns of European supplies. As the brass scrap from the Americas are already in short supply, the decline in European supply has kept prices of American brass scrap firm.

The SMM survey anticipates that the operating rate of copper billet producers in September 2024 will be 53.8%, up 2.24 percentage points MoM.

According to SMM, large enterprises hold an optimistic view of the market in September and have set high targets. This optimism is mainly due to the seasonal recovery of the copper billet market in September, coupled with the mid-autumn holiday in mid-September and the approaching National Day holiday at the end of the month, which will prompt downstream enterprises to stock up in advance, driving the demand for copper billets. Moreover, for some downstream enterprises, poor order performance in H1 due to suppressed copper prices means that H2 will be a critical period for them to rush to complete their annual targets. However, small copper billet producers expressed that they are under considerable pressure moving forward, as downstream demand is weaker than in previous years, and they are unable to attract orders with price advantages, making it difficult to maintain current orders.

Regarding raw materials, the decline in copper prices in August has restored the SHFE/LME price ratio, increasing the proportion of overseas direct purchases of brass scrap by copper billet producers and reducing the demand for domestic brass scrap. The supply of brass scrap in September is expected to be higher than in August, but attention must be paid to the quality of European supplies and whether continuous returns will lead to a decrease in supply.