Rapid rise in copper prices triggers panic of hoarding, and "frozen circulation" of secondary raw materials leads to "shortage of raw materials" for rod enterprises [SMM Weekly Review of Secondary Copper Raw Material]

SMM News on July 4:

         Copper prices struggled to rise, with the price center pulling back at the end of the week. The weekly increase was 660 yuan/mt. The price of bare bright copper in Guangdong was 74,200-74,400 yuan/mt, with a weekly increase of 1,000 yuan/mt.

        Since the copper price increase at the end of June, the circulation volume in the secondary copper raw material market has not significantly increased. The reason is that suppliers and traders of secondary copper raw materials have expressed concerns about the rapid rise in copper prices. They fear that after overseas macro events are settled, copper prices will quickly pull back, resulting in unnecessary inventory depreciation losses. Therefore, suppliers of secondary copper raw materials have only been acquiring small amounts of secondary copper raw materials recently, and mainly selling their own inventories on a daily basis. The more copper prices rise, the more copper rod enterprises report that secondary copper raw materials are difficult to purchase. Moreover, the price increase of secondary copper raw materials has also outpaced the copper price increase due to supply constraints. According to the weekly sample enterprise raw material inventory data for secondary copper rods, the raw material inventory this week was 4,850 mt, unchanged MoM. Due to the rapid copper price increase, downstream consumption has weakened, coupled with insufficient procurement volumes of raw materials by secondary copper rod enterprises, which have subsequently reduced production. Therefore, there has been no significant change in the raw material inventory of secondary copper rod enterprises MoM.

       This week, the CIF quote for US #1 copper scrap was a discount of 72-74¢/lb against the COMEX July copper contract price. The CIF quote for US #2 copper scrap was a discount of 79-81¢/lb against the COMEX 3M copper contract price. For US brass scrap with 65-65.5% LME (delivered to non-China regions), the absolute price was $6,400-6,500/mt. The LME coefficient for non-US Cu98.5% wire nodules CIF quote was 96.75-97%, and the LME coefficient for non-US bare bright copper CIF quote was 99-99.5% LME.

       Looking ahead to next week, the high copper prices will only lead to a limited increase in the supply of secondary copper raw materials, with prices continuing to deviate from reasonable levels. Secondary copper rod enterprises will have to reduce raw material procurement, affecting normal production.

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