Copper Prices Consolidate amid Volatility, Suppliers of Secondary Copper Raw Material Sell on Rallies

In May, copper prices fluctuated and consolidated, mainly trading within the range of 77,000-79,000 yuan/mt, while the price of bare bright copper similarly hovered within the range of 72,300-72,500 yuan/mt. During the first half of the month, amid considerable fluctuations in copper prices, the average daily price change ranged from 700-1,000 yuan/mt, and the price difference between primary metal and scrap remained at 1,300-1,700 yuan/mt. As suppliers of secondary copper raw materials still expected copper prices to rise, they chose to hold onto their inventory on trading days when prices fell. Consequently, the inventory cycle for suppliers of secondary copper raw materials was 2-3 days. When prices rose, influenced by bullish sentiment, they were also reluctant to sell too much. This led to an overall tight supply of secondary copper raw materials in the market during the first half of the month, with prices of secondary copper raw materials rising in tandem with copper prices but not falling in line with them.

In the second half of the month, the fluctuation range of copper prices narrowed, with daily changes ranging from 400 to 600 yuan/mt. As copper prices continued to fluctuate rangebound, many suppliers of secondary copper raw materials were concerned about a sudden drop after a prolonged period of sideways movement. They were willing to sell the secondary copper raw materials acquired on the same day as long as there was a slight profit. The fast-in, fast-out strategy adopted by suppliers also significantly improved the procurement volume of raw materials for many secondary copper rod enterprises. However, in terms of prices, if the price of bare bright copper deviated from the reasonable price by 200 to 300 yuan/mt, secondary copper rod enterprises suffered an average gross loss of 300 to 400 yuan/mt in May. Additionally, as May is traditionally an off-season for end-use consumption in China, high raw material prices and mediocre downstream consumption left many secondary copper rod enterprises in a state of loss throughout the month. Some secondary copper rod enterprises reported that the prices of high-grade secondary copper raw materials were unreasonable and the supply was insufficient, making it difficult to maintain continuous factory operations. Therefore, some secondary copper rod enterprises manually sorted the purchased secondary copper raw materials, using high-grade scrap for the production of secondary copper rods and low-grade scrap for the production of anode plates, ensuring that the smelting furnace remained in operation.

In terms of imports, China imported 204,700 mt of secondary copper raw materials in April, up 7.9% MoM. Based on shipping schedules, traders who imported secondary copper raw materials that arrived in China in April placed orders in February and March, coinciding with the post-Chinese New Year resumption of work and the eve of the initiation of the Sino-US trade war. Driven by the motivation to stockpile and purchase more before the trade war to avoid tariff impacts, the import volume of secondary copper raw materials in April increased slightly. However, the import volume of secondary copper raw materials in May is expected to decline significantly. This is mainly because the Sino-US trade war was in full swing in March and April, and the high tariffs discouraged many traders from purchasing secondary copper raw materials from the US. Without the supply from the US, China's imports of secondary copper raw materials may enter a tight state.

Looking ahead to May, as the implementation of "reverse invoicing" is intensified across the country, the increase in procurement costs of secondary copper raw materials may force copper rod enterprises to lower the prices of secondary copper raw materials, and the price difference between primary metal and scrap is expected to widen. In addition, imported secondary copper raw materials, which include VAT invoices, have a natural advantage over foreign secondary copper raw materials. It is expected that more and more copper rod enterprises will purchase imported secondary copper raw materials, and prices are also expected to rise accordingly.