Smelting demand weakens; secondary copper rod enterprises resume production of secondary copper rod [SMM Weekly Review of Secondary Copper Rod]

SMM June 27 News:

       According to SMM survey data, the operating rate of secondary copper rod this week was 27.31%, up 3.19 percentage points WoW but down 15.13 percentage points YoY. Meanwhile, the average price spread between refined and secondary copper rod narrowed by 132 yuan/mt WoW to 1,042 yuan/mt. Additionally, the average discount of secondary copper rod in Jiangxi against copper futures expanded by 32 yuan/mt WoW to 568 yuan/mt. Based on SMM's secondary copper rod gross profit model, the weekly gross profit stood at -467 yuan/mt, narrowing by 101 yuan/mt WoW.

      SMM learned that structural tightness emerged in secondary copper raw material supply. Scrap yards and recycling stations saw sharp declines in salable materials, making procurement difficult for goods yards. Suppliers' reluctance to sell intensified with rising copper prices, with some regions experiencing difficulties in purchasing even at premium prices. Meanwhile, import channels were blocked as high overseas discount coefficients made transactions unfeasible for domestic traders. Demand remained weak - though secondary copper rod enterprises reported recovering orders, they refused large-scale order-taking due to persistent losses. The policy adaptation period (reverse invoicing) coupled with the traditional off-season kept production willingness low. End-user wire and cable enterprises continued facing inventory pressure, maintaining low procurement activity. The market was trapped in a stalemate of "raw material shortage and finished product stagnation." The slight WoW rebound in secondary copper rod operating rate occurred because major smelters stopped purchasing spot anode plates in recent weeks to control copper anode inventory ahead of mid-year, prompting some secondary copper rod producers to resume operations using previously accumulated materials or manually sorted daily arrivals. Weekly finished product inventories of secondary copper rod fell by 140 mt WoW to 3,210 mt. The noticeable late-week expansion in price difference between copper cathode and copper scrap forced traders holding spot positions after futures arbitrage to actively pick up goods from secondary copper rod enterprises, causing the minor inventory decline.

     With intensifying overseas squeeze sentiment passively pushing up domestic copper prices, maintaining the price spread above 1,800 yuan/mt next week may boost secondary copper rod consumption. However, considering tight raw material supply, any operating rate improvement would be limited - SMM forecasts next week's rate at 27.04%.

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