Copper Prices Fall, Secondary Copper Rod Profitability Disappears [SMM Analysis]

To better track the operating conditions of secondary copper rod plants nationwide, the weekly survey sample has been adjusted as follows: the number of secondary copper rod enterprises in Hubei and Anhui regions has been increased, and long-term shutdown enterprises have been removed from the sample. The number of samples has increased from 15 to 18, and the capacity has increased from 1.59 million mt to 1.94 million mt. According to SMM survey data, the operating rate of secondary copper rod plants was 24.12% last week. The average price spread between refined and scrap rods was 791 yuan/mt last week, down 264 yuan/mt from the average price spread of 1,055 yuan/mt two weeks ago. Last week, the average discount of secondary copper rod against futures prices in Jiangxi was 286 yuan/mt, up 191 yuan/mt WoW.

According to the SMM survey, some secondary copper rod plants are still shut down mainly because the local government has not yet issued previous subsidies or tax rebates. Meanwhile, with high secondary copper raw material prices last week, the tax-free price of secondary copper raw materials has exceeded the tax-free price of secondary copper rods by 100-200 yuan/mt. Secondary copper rod plants reported that to maintain customer sources, they could only deliver at a loss. The decline in copper prices has also further narrowed the price spread between refined and scrap rods, causing the profitability of secondary copper rods to disappear.

Many secondary copper rod plants have experienced varying degrees of shutdowns this year. To catch up with production and tax targets, some have even operated additional equipment. With sufficient procurement of secondary copper raw materials, the operating rate of secondary copper rod plants is expected to steadily increase.