Bullish news at home and abroad drives copper prices higher; copper scrap holders sell at highs [SMM Analysis]

In mid-September, the US Fed cut interest rates for the first time since March 2020. On September 24, China's central bank implemented the "three cuts": interest rate cut, RRR cuts, and a reduction in the mortgage rate on existing home loans. Under the influence of multiple macro factors, copper prices rose rapidly, and copper scrap holders took the opportunity to sell at highs, significantly improving the supply of copper scrap compared to early September. Looking back to early September, copper prices declined, and most secondary copper rod plants maintained low operating rates due to Document No.783. With insufficient demand, copper scrap holders chose to hold back cargoes, causing high copper scrap prices. By mid-September, the implementation of new policies in Jiangxi was delayed, and many secondary copper rod plants prepared to resume production. However, the lack of low-priced copper scrap slowed their recovery. As expectations for the Fed's September rate cut heated up overseas, copper prices continued to rise. The Fed's unexpected 50 basis point rate cut, combined with domestic macro policy measures, further boosted copper prices. Since September 9, futures copper prices rose from 72,400 yuan/mt to 79,000 yuan/mt, an increase of 6,600 yuan/mt, while bare bright copper prices rose from 66,500 yuan/mt to 70,800 yuan/mt, an increase of 4,300 yuan/mt. According to the SMM survey, copper scrap holders reported a significant improvement in procurement compared to early in the month after the copper price increase. With the National Day holiday approaching, copper scrap holders will reduce inventory and sell at highs. In terms of imports, the import volume of copper scrap in August was 169,500 mt, down 13% MoM. The impact of the new policy in August led most secondary copper rod plants to shut down, and those maintaining production preferred to purchase imported copper scrap with invoices. However, demand remained limited, and during the traditional off-season, copper scrap import traders did not make extensive procurement plans.

Looking ahead to October, with high copper prices, copper scrap holders are willing to sell large quantities of copper scrap to quickly recover funds, and as secondary copper rod plants gradually resume production, demand for copper scrap will increase. It is expected that the inventory of raw materials at secondary copper rod plants will increase. Regarding imported copper scrap, with overseas copper prices remaining high, import traders will adopt a wait-and-see attitude and will not purchase overseas copper scrap in the short term, leading to a slight decline in copper scrap import volume.