New Orders Weaken as Peak Season Nears End; Copper Cathode Rod Operating Rate Expected to Decline Further[SMM Analysis]

According to SMM, the operating rate of copper cathode rod enterprises in May was 70.26%, down 3.59 percentage points MoM and 0.75 percentage points lower than the expected value. The operating rate of copper cathode rod enterprises in May increased by 7.42 percentage points YoY. Among them, the operating rate of large enterprises was 81.96%, that of medium-sized enterprises was 52.89%, and that of small enterprises was 55.10%.

The operating rate of the copper cathode rod industry in May was recorded at 70.26%, up 7.42 percentage points YoY (the operating rate in May last year was 62.84%).

According to SMM data, the average price of SMM #1 copper cathode in May was 78,403.42 yuan/mt, up 1,652.71 yuan/mt from April, with copper prices remaining firm during the month. According to SMM data, the average price difference between secondary copper rod in Jiangxi and power-use copper rod in east China in May was 1,159 yuan/mt, expanding by 379 yuan/mt MoM from the previous month. The operating rate of secondary copper rod production recovered to some extent during the month. Copper prices have consistently fluctuated at highs, suppressing downstream purchasing sentiment. Meanwhile, as the peak season for the wire and cable industry nears its end, both orders on hand and new consumption for copper cathode rod enterprises have declined to some extent, leading to a decrease in the operating rate.

In May, the raw material inventory/output ratio of copper cathode rod enterprises was 7.86%, and the finished product inventory/output ratio was 10.90%.

Compared to the statistical period in April, although the inventory of copper cathode rod enterprises excluded the impact of holidays, due to recent production cuts and inventory reduction arrangements by multiple enterprises, the monthly raw material and finished product inventory/output ratio only increased slightly. In May, the raw material inventory of copper cathode rod enterprises increased by 0.59 percentage points MoM, and the finished product inventory/output ratio of copper cathode rod enterprises increased by 1.22 percentage points MoM.

The operating rate of copper cathode rod enterprises is expected to be 70.15% in June.

As copper prices continue to fluctuate at highs, new orders from downstream enterprises of copper cathode rods have decreased. Most copper cathode rod enterprises have reported a slight slowdown in cargo pick-up by downstream customers. The market is showing initial signs of the off-season impact, with overall consumption weakening MoM. On the basis of the decline in the operating rate in May, copper cathode rod enterprises have a certain degree of pessimism about the future market. However, as the mid-year approaches, there has been some price-cutting and cargo shipment in the market. It is expected that the operating rate of copper cathode rod enterprises will continue to decline slightly to 70.15% in June, down 0.12 percentage points MoM and up 3.6 percentage points YoY. Additionally, it is worth noting that if copper prices do not significantly correct in June, there is still a possibility that the operating rate of copper cathode rod enterprises may fall short of expectations.