Q3 Report Shows Comprehensive Losses for Listed Copper Foil Companies, Industry "Full of Thorns" [SMM Analysis]

According to the latest Q3 financial reports of listed companies, the revenue of major representative enterprises in the copper foil industry increased YoY, but they are all in a state of severe loss, with profits significantly declining YoY.

1. Significant Increase in Copper Price Center in 2024

As of December 4, 2024, the average price of SMM #1 copper cathode in 2024 was 74,960.6 yuan/mt, an increase of 6,655.9 yuan/mt compared to the average price of 68,304.7 yuan/mt in 2023. The copper foil industry mostly adopts the pricing model of the previous month's average copper price, i.e., "M-1". There is a certain time lag between raw material procurement and the adjustment of the selling price of finished products, making it difficult for enterprises to avoid the risk of sharp fluctuations in copper prices. In the context of this year's volatile copper prices, the costs for copper foil enterprises have increased. Additionally, the long settlement period for downstream copper foil has led to an increase in bad debt provisions for accounts receivable.

2. Decline in Copper Foil Processing Fees

According to SMM lithium battery copper foil (6μm) processing fee prices, as of now, the average processing fee in 2024 is 17,272 yuan/mt, a decrease of 8,008 yuan/mt compared to 25,280 yuan/mt in 2023. The current issue facing the copper foil industry is severe overcapacity. With the rapid expansion of industry capacity in recent years, the market has seen a surge in supply, leading to continuous declines in copper foil processing fees due to low-price competition. However, recent new orders from downstream have shown steady growth, and amid the losses of copper foil enterprises, the sentiment to stand firm on quotes has risen, showing a trend of slight rebound in processing fees.

3. Decline in Capacity Utilisation Rate

As of October 2024, according to SMM statistics, the monthly average operating rate of Chinese copper foil enterprises was 66.23%, a decrease of 13.19 percentage points compared to 79.42% in the same period of 2023. Due to the continuous decline in processing fees, many copper foil enterprises controlled capacity release in H1, with a large number of shutdowns at the beginning of the year. Although the operating rate rebounded in H2 with the growth of downstream demand, the overall operating rate was still weaker YoY.

In summary, the short-term overcapacity issue in the copper foil industry is difficult to resolve completely. However, under the pressure of processing fees, losses and cut-throat competition faced by enterprises, the sharp fluctuations in copper prices will accelerate the process of capacity exit in the industry. Capacity integration, cost reduction, efficiency improvement, and product competitiveness enhancement will become the core of industry development.