Post-Holiday Sluggish Consumption Leads to Varying Degrees of Inventory Buildup Among Secondary Copper Rod Enterprises

The operating rate of secondary copper rod reached 26.81% in February, lower than the expected 31.7%. After the Chinese New Year holiday, copper prices initially rose and then fell, climbing to a high of 78,500 yuan/t before pulling back to a sideways movement in the range of 76,500-77,500 yuan/t. Following the rapid increase in copper prices after the holiday, the price difference between primary metal and scrap quickly reached 2,800 yuan/t, and the price difference between primary and secondary copper rods widened to 1,370 yuan/t. Although the economic benefits of secondary copper rods became somewhat evident, end-users and traders remained cautious. Due to the further increase in copper prices compared to pre-holiday levels, post-holiday orders from end-user wire and cable enterprises were scarce, and restocking demand has yet to materialize.

In the middle and late stages of the month, after high copper prices completely suppressed downstream demand, copper prices pulled back but with limited declines. End-use wire and cable enterprises, with raw material inventories approaching critical levels, were forced to replenish inventories. However, given the limited order expectations, these enterprises maintained a just-in-time procurement strategy, planning to place active orders only when copper prices pull back to 75,000 yuan/t. Due to the limited recovery in end-use consumption, the pullback in copper prices kept the price difference between primary metal and scrap hovering around 1,600-1,700 yuan/t, while the price spread of copper cathode rod and secondary copper rod also narrowed to 700-900 yuan/t, dampening suppliers' willingness to pick up goods. According to interviewed enterprises, finished product inventories of secondary copper rod in February stood at 21,800 t, down 4,000 t MoM from January's 25,800 t. Despite this, finished product inventories at secondary copper rod enterprises remained at high levels, with some enterprises indicating that if inventory buildup persists in March, they may consider temporarily halting production and resuming only after inventories decline.

On the raw material procurement side, the surge in copper prices before and after the holiday prompted many secondary copper raw material suppliers to offload large amounts of inventory, leading to low social inventories of secondary copper raw materials. Subsequently, with the pullback in copper prices, the availability of secondary copper raw materials became tight. However, constrained by limited orders and the gradual nationwide implementation of "reverse invoicing," most secondary copper rod enterprises opted for just-in-time procurement, ensuring normal production without being significantly affected by the tight supply of secondary copper raw materials.

Looking ahead to March, the weak end-use consumption outlook has led many secondary copper rod enterprises to hold low expectations for the upcoming traditional peak consumption season. Most secondary copper rod enterprises expect that achieving 80% of the sales during the same period in previous years would be the best-case scenario for March.