In July, secondary copper rod plants still failed to reverse losses, and the operating rate pulled back as scheduled.

The operating rate of secondary copper rod in July was 30.9%, higher than the expected 29.4%, down 2.71% MoM and 5.17% YoY. The secondary copper rod industry was deeply trapped in a multiple dilemma of "supply tightening - weak demand - policy disruptions" in July.

Due to issues with raw material supply, copper prices generally followed a pattern of falling back from highs, limited rebound, and then another pullback during the month. The monthly average price difference between primary metal and scrap was 1,173 yuan/mt, down 167 yuan/mt MoM. For most of the time, the price difference remained below 1,000 yuan/mt, indicating that the price of recycled copper raw materials was very firm. When copper prices retreated, suppliers of recycled copper raw materials refused to budge on prices when selling. If copper prices continued to fall, suppliers even chose to halt sales. However, when copper prices rose, the price increase of recycled copper raw materials exceeded 50% of the previous copper price increases. This phenomenon suggests that the supply situation of recycled copper raw materials is not optimistic. Suppliers of recycled copper raw materials are not panicked into selling due to falling copper prices. The low circulation of recycled copper raw materials in the market supports suppliers in holding onto their inventory in anticipation of price increases. Under such circumstances, it is very difficult for copper rod enterprises to procure raw materials. To compete with other secondary copper rod enterprises in procuring raw materials, they need to bid 100-200 yuan/mt higher than the market price for recycled copper raw materials, regardless of whether copper prices are rising or falling. In July, the inventory of recycled copper raw materials for copper rod production was 14,000 mt, down 1,800 mt MoM.

Demand side, the monthly average price difference between copper cathode rod and secondary copper rod was 885 yuan/mt, down 308 yuan/mt MoM. Entering the traditional off-season in July, both high temperatures and the rainy season affected the operating rate of downstream terminals, impacting orders for wire and cable enterprises. With the price difference between copper cathode rod and secondary copper rod remaining below the advantageous threshold of 1,300 yuan/mt, it significantly dampened wire and cable enterprises' procurement of secondary copper rod. According to enterprises, transactions within the month were mainly dominated by traders. Additionally, according to SMM's theoretical gross profit model for secondary copper rod, the monthly average was -384 yuan/mt, down 26 yuan/mt MoM. The sales losses of secondary copper rod enterprises only narrowed slightly, but many secondary copper rod enterprises still maintained production. This was due to a decrease in smelters' spot order procurement volume for anode plates in July. Through communication with smelters, it was learned that their current anode plate inventory was at a normal level, so the supply volume of long-term contracts for anode plates in July could basically meet daily demand, thus reducing the spot order procurement plan.

The operating rate of secondary copper rod enterprises pulled back in August. As the demand for spot order anode plates from smelters rebounded in August, secondary copper rod enterprises will convert their capacity back to anode plates, resulting in a normal pullback in the operating rate of secondary copper rod production.