Policy Impact on Raw Material Prices, Suppliers Need Time to Adapt [SMM Analysis]

SMM Aug 31:

       Copper prices fluctuated upward overall in August, with a monthly increase of 430 yuan/mt. During the same period, bare bright copper prices ranged between 73,300-73,500 yuan/mt, rising by 300 yuan/mt. At the beginning of the month, the US Fed's interest rate meeting did not signal a significant interest rate cut in September, but due to positive Chinese macro data, copper prices gained support and rose steadily. Entering mid-to-late August, copper price volatility intensified, especially with sharp fluctuations at month-end, significantly suppressing suppliers' willingness to sell recycled copper raw materials.

     Last month, recycled copper raw material prices continued the "follow-up but not follow-down" trend in the first half, but from late August, as the "reverse invoicing" policy was gradually implemented nationwide, copper rod enterprises saw short-term procurement volume shrink due to invoice quota limits. Additionally, market rumors of "cleaning up illegal investment attraction policies" emerged at month-end, targeting local governments' rectification of illegal subsidies and tax rebates to enterprises. Several secondary copper rod enterprises chose to halt production to await clearer policies amid concerns over operational costs, thereby reducing demand for recycled copper raw materials.

     Suppliers struggled to maintain their previous price-holding strategy, while secondary copper rod enterprises, to avoid policy risks, mostly urged suppliers to complete deliveries and payment settlements before August 28. This also prompted recycled copper raw material suppliers to actively sell, avoiding potential price declines in September.

     On the import side, August recycled copper raw material imports stood at 190,100 mt in physical content, up 3.73% MoM but still down 2.36% YoY. Among major source countries, Japan, Thailand and South Korea ranked top three, while the US took fourth place with 9,236 mt. Affected by unresolved Sino-US trade tariffs and delayed second-round negotiations, overseas recycled copper raw material supply remained mismatched, a pattern expected to persist in the short term.

     Looking ahead to September, as domestic policy adjustments take effect, secondary copper rod enterprises will bargain down purchasing prices upstream to cope with rising tax burdens. In the short term, traders may resist low-price transactions, leading to tightened recycled copper raw material circulation and lower enterprise operating rates. Only after the new pricing model gradually gains market acceptance can recycled copper raw material supply be expected to recover gradually.