Industry Dilemma Under High Copper Prices: Dual Decline in Operating Rates of Copper Cathode Rod and Secondary Copper Rod, Inventory Accumulation [SMM Analysis]

As copper prices continued to rise, with consumption being suppressed by absolute prices and the operating rate of secondary copper rod plants passively reduced during a policy observation period, the discounts of secondary copper rod against copper futures fell throughout March. The price difference between refined and secondary copper rods reached its highest level since September 2024. In this context, how is the current market for refined and secondary copper rods performing? Has anode supply increased? Here is a detailed analysis: With copper prices rising, the discount of secondary copper rod in Jiangxi against copper futures is shown in the figure below. First, from the perspective of the secondary copper market, the performance of secondary copper rod and anode plants is as follows: As copper prices continued to climb, the supply of secondary copper increased slightly compared to before. Although most suppliers held back cargoes due to bullish expectations, leading to tight procurement of secondary copper raw materials, the high absolute prices have consistently suppressed end-use consumption. Downstream cargo pick-up from secondary copper rod enterprises was also weak, resulting in a decline in demand for secondary copper raw materials. Additionally, with the initial finalisation of the reverse invoicing policy, the market's wait-and-see sentiment has also restrained the operating rates of secondary copper rod plants. According to SMM statistics, the weekly operating rate of secondary copper rod plants has declined for three consecutive weeks. Against the backdrop of weakening demand and sluggish consumption, the discounts of secondary copper rod against copper futures have continuously decreased, widening the price spread between anode processing fees and the discounts of secondary copper rod against copper futures, making anode processing fees more advantageous (as shown in the figure). According to SMM, since early March, many secondary copper rod enterprises have started producing anodes. From the perspective of refined copper rods, under the pressure of high absolute prices and the expanding price difference between refined and secondary copper rods, both orders on hand and new orders for refined copper rod enterprises have decreased to varying degrees. Many refined copper rod enterprises reported that some downstream consumption has already shifted to secondary copper rods. However, according to SMM, finished product inventories at secondary copper rod enterprises remain high, so the overall market focus is still on inventory reduction. As shown in the figure, SMM data indicates that the finished product inventories of refined copper rod enterprises have risen significantly again. Operating rates may continue to decline, and it is noteworthy that refined copper rod traders have once again adopted a low-price competition strategy, which may further increase the pressure on refined copper rod enterprises to sell their products. In summary, as copper prices continue to rise, although the expanding price difference between refined and secondary copper rods gives secondary copper rods more economic advantages, the limited shift in consumption has led to high finished product inventories for both refined and secondary copper rod enterprises. The operating rates of both types of enterprises have declined, and overall consumption in the copper rod market is being suppressed by high copper prices, leading to increased sales pressure. If copper prices rise further, the suppression of future consumption may intensify. Under the conditions of a policy observation period for secondary copper rods and persistently weak downstream consumption for refined copper rods, when the operating rates of refined and secondary copper rod enterprises will rebound remains dependent on the downstream acceptance of copper prices.