Copper Cathode Production in March Far Exceeded Expectations, and April Output Only Slightly Declined [SMM Analysis]

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SMM March 31 News:

     China's copper cathode production in March increased by 63,900 mt MoM, up 6.04%, and rose 12.27% YoY. The cumulative production from January to March increased by 274,500 mt YoY, up 9.4%.

     The significant increase in copper cathode production in March was mainly due to the following reasons: 1. According to our statistics, only two smelters had maintenance plans in March, but the impact on actual production was relatively small, with some manufacturers indicating that the maintenance effects would be reflected in April; 2. Although copper concentrate TCs are at historically low levels (as of March 28, the weekly index for imported copper concentrates was -$24.14/mt), many smelters are still actively producing to achieve a strong start in Q1; 3. The capacity utilization rate of newly commissioned smelters in the southwest is increasing; 4. Recent sulphuric acid prices continue to rise, partially offsetting smelters' losses; 5. Copper prices have surged, and copper scrap supply has increased compared to before, prompting smelters to increase purchases of copper scrap to supplement the shortage of copper concentrates.

      In summary, the sample operating rate of the copper cathode industry in March was 87.68%, up 4.86 percentage points MoM; among them, the operating rate of large smelters was 91.43%, up 4.8 percentage points MoM, the operating rate of medium-sized smelters was 81.37%, up 4.56 percentage points MoM, and the operating rate of small smelters was 71.63%, up 6.78 percentage points MoM. The operating rate of smelters using copper concentrates was 91.7%, up 4.7 percentage points MoM; the operating rate of smelters not using copper concentrates (copper scrap or copper anode) was 68.1%, up 5.7 percentage points MoM, as increased raw material supply boosted the operating rate.

      Entering April, according to our statistics, three smelters currently have maintenance plans, with an estimated affected volume of around 24,000 mt. Additionally, although copper concentrate supply is tight, some smelters have started to reduce the input of copper concentrates, but by increasing the input of copper scrap and copper anode, copper cathode production remains stable. Finally, the commissioning of new smelters in east China and the increased capacity utilization rate of smelters in the southwest have resulted in only a slight decline in total production.

     Based on production schedules from various companies, SMM expects domestic copper cathode production in April to decrease by 5,800 mt MoM, down 0.52%, but increase by 131,200 mt YoY, up 13.32%. The cumulative production from January to April increased by 405,700 mt YoY, up 10.39%. The sample operating rate of the copper cathode industry in April was 87.34%, down 0.34 percentage points MoM; among them, the operating rate of large smelters was 91.2%, down 0.23 percentage points MoM, the operating rate of medium-sized smelters was 80.83%, down 0.54 percentage points MoM, and the operating rate of small smelters was 70.90%, down 0.73 percentage points MoM. The operating rate of smelters using copper concentrates was 91.4%, down 0.3 percentage points MoM; the operating rate of smelters not using copper concentrates (copper scrap or copper anode) was 67.7%, down 0.5 percentage points MoM. Finally, we expect production in May to continue to decline, mainly due to increased smelter maintenance and tight raw material supply.