Sales Losses Widen, Secondary Copper Rod Enterprises Reduce Operating Rates [SMM Weekly Review of Secondary Copper Rod]

SMM News on May 23:

      According to SMM's survey data, the operating rate of secondary copper rod production this week was 22.14%, up 0.27 percentage points WoW and down 6.87 percentage points YoY. Meanwhile, the average price difference between copper cathode rod and secondary copper rod was 1,082 yuan/mt this week, narrowing by 84 yuan/mt WoW. Additionally, the average discount of secondary copper rod against copper futures in Jiangxi was 188 yuan/mt, narrowing by 437 yuan/mt WoW.

       Based on SMM's calculation of the gross profit model for secondary copper rod sales, the gross profit for the week was -324 yuan/mt, expanding by 108 yuan/mt WoW. Copper prices fluctuated downward, but the tight supply of secondary copper raw materials led suppliers to maintain firm pricing for shipments. According to secondary copper rod enterprises, suppliers' daily quotes are currently 200-300 yuan/mt higher than reasonable prices. To ensure continuous production, secondary copper rod enterprises are forced to accept secondary copper raw materials at low premiums in the market. Moreover, the rainy season in May affected terminal production, weakening the consumption demand for secondary copper rod. To safeguard sales of secondary copper rod from being impacted by high raw material prices, enterprises have to bear part of the premium costs for raw materials. As a result, the gross profit loss for secondary copper rod enterprises continued to widen this week. To control sales losses, some secondary copper rod enterprises restricted daily shipments, leading to finished product inventories of 2,550 mt at weekly sample enterprises, up 700 mt WoW. Additionally, amidst raw material shortages, high prices, and mediocre end-use consumption, a few secondary copper rod enterprises have shifted their production capacity from secondary copper rod to copper anode {{in the context related to copper}}. Although both secondary copper rod and copper anode are currently experiencing varying degrees of sales losses, enterprises have indicated that copper anode can partially offset losses through pricing on the futures market. If more enterprises switch to producing copper anode, the RC may expand in June.

       Looking ahead to next week, there will be no significant improvement in the current situation of secondary copper rod enterprises. Some enterprises will resume production after equipment maintenance, and the weekly operating rate is expected to rebound slightly to 27.04%.

》Subscribe to view SMM's historical spot metal prices

》Click to view SMM's copper industry chain database