SMM, January 26:
In 2024, the government introduced several policies targeting the scrap utilisation industry, among which "reverse invoicing" and the Fair Competition Review Regulations had varying impacts on the industry.
In 2024, the monthly operating rate of secondary copper rod enterprises was lower than in 2022 and 2023. In H1, market speculation in March and April about the tight supply of copper ore led to a decline in copper cathode production, driving copper prices higher. Meanwhile, smelters began equipment maintenance in March and had to purchase externally anode plates as raw materials to ensure stable copper cathode production. A decline started in Q2, mainly because smelters quoted processing fees for anode plates at 400-500 yuan/mt, while the discount of secondary copper rod against copper futures exceeded 2,000 yuan/mt.
Since April, the selling price of anode plates has been over 1,000 yuan/mt higher than that of secondary copper rods, prompting many secondary copper rod enterprises to shift to producing anode plates. Consequently, the operating rate of secondary copper rod enterprises declined month by month starting in April. Additionally, with the implementation of "reverse invoicing" on May 1, procurement costs increased, leading secondary copper rod enterprises to attempt transferring costs upstream. This caused price chaos in the secondary copper raw material market, with inconsistent enforcement across regions, prompting some secondary copper rod enterprises to suspend production and wait. Furthermore, with the implementation of the Fair Competition Review Regulations on August 1, aimed at addressing tax havens, the government required local authorities to cancel various subsidies and incentive policies for enterprises. This raised concerns among many enterprises about the impact of policy cancellations on normal operations, leading to production suspensions. As a result, the low operating rate of secondary copper rod enterprises throughout the year was primarily due to policy impacts.
Looking ahead to 2025, secondary copper raw material imports are expected to decline due to macroeconomic and regional policy adjustments. Domestic secondary copper rod enterprises are targeting the shortage of ore faced by smelters, with increasing anode plate capacity expected to come online after the Chinese New Year. Market demand for anode plate raw materials is anticipated to surpass that for secondary copper rod raw materials. With reduced imports and the lack of invoices for domestic raw materials, scrap utilisation enterprises may promote the implementation of "reverse invoicing," gradually improving the circulation of invoices for domestic secondary copper raw materials.
