SMM July 4 News:
According to SMM survey data, the operating rate of secondary copper rod plants this week was 24.79%, down 2.52 percentage points WoW and 5.16 percentage points YoY. Meanwhile, the average price spread between copper cathode rod and secondary copper rod this week was 1,549 yuan/mt, expanding by 507 yuan/mt MoM. Additionally, the average discount of secondary copper rod against copper futures in Jiangxi was 918 yuan/mt, expanding by 350 yuan/mt MoM. Based on SMM's calculation of the gross profit model for secondary copper rod sales, the gross profit for the week was -46 yuan/mt, narrowing by 421 yuan/mt MoM.
According to SMM survey, the supply of secondary copper raw materials has tightened structurally, with the available supply from dismantling sites sharply declining. Suppliers actively sold their cargoes when the price spread widened on June 30, but after the copper prices surged on July 2, they switched to holding back cargoes. Secondary copper rod enterprises are facing the dilemma of "difficulty in purchasing at higher prices". On the demand side, they are under dual pressure from policies and costs. The "reverse invoicing" policy has been fully implemented in Anhui and Hubei, leading some enterprises to halt production and reconstruct their procurement processes. Despite a rebound in orders, secondary copper rod enterprises continue to suffer losses due to high raw material costs and the pressure of policy transitions, resulting in low willingness to take orders. The market has fallen into a negative cycle of "policy disruptions to production - exacerbated raw material shortages - weak end-use demand". Regional supply disruptions and the unresolved risks of the Section 232 tariff will continue to suppress the industry's recovery.
In addition, the decline in the operating rate of secondary copper rod plants this week is attributed to the fact that July has already begun. After smelters completed their mid-year raw material inventory checks, they resumed purchasing spot order copper anodes in the market. Considering the pressure of raw material procurement and the speed of capital return, secondary copper rod enterprises have once again converted their production capacity to produce copper anodes. It is expected that due to the even tighter supply of high-grade secondary copper raw materials in the future, many secondary copper rod enterprises will completely switch to producing copper anodes. According to SMM's current statistics, the domestic casting capacity of copper anodes produced from copper scrap exceeds 3 million mt, and the supply of copper anodes will be relatively loose in H2.
Looking ahead to next week, the pullback in copper prices will also suppress suppliers' willingness to sell. After the supply of secondary copper raw materials becomes even tighter, the operating rate of secondary copper rod enterprises will decline further.
