High Raw Material Prices Lead to Significant Decline in Operating Rate of Secondary Copper Rod [SMM Weekly Review of Secondary Copper Rod]

SMM April 18th News: According to SMM survey data, the operating rate of secondary copper rod this week was 22%, down 7.85 percentage points WoW and down 9.76 percentage points YoY. Meanwhile, the average price difference between copper cathode rod and secondary copper rod this week was 504 yuan/mt, down 85 yuan WoW. In addition, the premium of Jiangxi secondary copper rod against copper futures was 82 yuan/mt, up 92 yuan WoW. Secondary copper rod enterprises, fearing high raw material prices, were reluctant to purchase secondary copper raw materials at market prices. Coupled with the premium of secondary copper rod against copper futures, downstream cable end-users almost never considered secondary copper rod. As a result, secondary copper rod enterprises chose to suspend production, mainly hoarding low-priced secondary copper raw materials during the week, leading to a significant drop in the operating rate of secondary copper rod this week. Furthermore, the high price and scarce supply of secondary copper raw materials in the market have made it difficult for some secondary copper rod enterprises to purchase enough raw materials to fulfill urgent orders. Forced to do so, they had to purchase copper cathode for production. According to SMM's theoretical gross profit data monitoring model for secondary copper rod, the gross profit from secondary copper rod sales this week ranged from -100 to -200 yuan/mt, indicating that high raw material prices, disappearing downstream demand, and sales losses have caused secondary copper rod enterprises to be unwilling to start production. The finished product inventory of secondary copper rod enterprises this week was 1,750 mt, down 1,050 mt WoW. A large number of secondary copper rod enterprises and traders are already in a state of low secondary copper rod inventory. Under weak demand and the impact of sales losses, secondary copper rod traders will find it difficult to purchase secondary copper rod in the short term. Looking ahead to next week, secondary copper rod enterprises have accumulated some secondary copper raw materials and started production on Thursday this week. However, as long as the raw material shortage issue remains unresolved, the operating rate of secondary copper rod will be difficult to return to normal levels.