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SMM, February 28:
In February, SMM copper cathode production increased by 44,400 mt MoM, a rise of 4.38%, up 11.35% YoY, and exceeded expectations by 2,800 mt.
Copper cathode production in February increased significantly as expected, mainly due to the following reasons: 1. Smelters that underwent maintenance in January resumed normal production, boosting output; 2. Although copper concentrate TCs have dropped into negative territory, most smelters had stocked sufficient raw material inventory before the Chinese New Year, and February production was not affected by the low copper concentrate TCs (as of February 28, the monthly index for imported copper concentrates was -$9.14/mt, down $10.9/mt MoM), allowing them to maintain normal production. The reasons for the production exceeding expectations in February include: 1. A new smelter in Southwest China commenced operations; 2. The capacity utilisation rate of a relatively new smelter in Jiangxi continued to improve.
In summary, the sample operating rate of the copper cathode industry in February was 82.81%, up 2.59 percentage points MoM; among them, the operating rate of large smelters was 86.63%, up 3.48 percentage points MoM, medium-sized smelters 76.81%, up 1.68 percentage points MoM, and small smelters 64.85%, down 2.38 percentage points MoM. The operating rate of smelters using copper concentrates was 87.1%, up 1.1 percentage points MoM, while smelters not using copper concentrates (relying on copper scrap or anode plates) had an operating rate of 62.4%, down 6.3 percentage points MoM.
Entering March, according to our statistics, three smelters have maintenance plans, but the impact on actual production is relatively small, with some manufacturers indicating that the maintenance impact will be reflected in April. Additionally, the increase in production days in March will also lead to higher output. However, due to tight copper scrap supply, the production of copper cathode by smelters using copper scrap remains at a low level. Some copper cathode producers using mined copper have had to reduce production loads due to significant losses, and we expect this situation to become increasingly common in the future. It is reported that based on the spot order price of copper concentrates, the loss is approximately 2,083 yuan/mt, while for long-term contracts, the loss is about 678 yuan/mt. Notably, stimulated by increased downstream demand, sulphuric acid prices have recently risen to some extent, which will partially offset smelters' losses. Attention should be paid to whether sulphuric acid prices can continue to rise in the future.
Based on production schedules from various companies, SMM expects domestic copper cathode production in March to increase by 42,000 mt MoM, a rise of 3.97%, and up 100,700 mt YoY, a rise of 10.08%. The sample operating rate of the copper cathode industry in March is expected to be 86.24%, up 3.42 percentage points MoM; among them, the operating rate of large smelters is expected to be 90.91%, up 4.27 percentage points MoM, medium-sized smelters 77.90%, up 1.08 percentage points MoM, and small smelters 68.08%, up 3.23 percentage points MoM. The operating rate of smelters using copper concentrates is expected to be 90.7%, up 3.6 percentage points MoM, while smelters not using copper concentrates (relying on copper scrap or anode plates) are expected to have an operating rate of 64.7%, up 2.3 percentage points MoM. Finally, we expect production to decline in April, mainly due to increased maintenance at smelters and significant losses leading some smelters to reduce their capacity utilisation rates.
