Policy Watch and Secondary Copper Rod Market Amid Copper Price Volatility: Short-Term Pressure and Resilient Recovery

This week, the secondary copper rod market exhibited a complex situation under the dual influence of macro policies and price fluctuations. After the US Fed announced a 25bp interest rate cut in September, the exhaustion of positive factors triggered profit-taking and capital outflows, leading to a significant pullback in copper prices, with a cumulative decline of over 1,000 yuan/mt by Thursday this week. The price of bare bright copper in Guangdong was reported at 73,500–73,700 yuan/mt, down 900 yuan/mt WoW. The rapid pullback in copper prices reduced suppliers' willingness to sell recycled copper raw materials, and the supplier sentiment index compiled by SMM fell from 2.29 to 2.26. Traders generally believe that, against the backdrop of unstable copper prices and no clear negative expectations, the downside room is limited, so they tend to hold goods and wait for price increases rather than rush to sell. Additionally, due to policy uncertainties related to Document No. 770 in Jiangxi, only a small number of enterprises resumed operations, and weak market demand further suppressed liquidity. Although raw material supply tightened, secondary copper rod enterprises' raw material inventory increased by 500 mt WoW to 6,200 mt, mainly due to the arrival of previously high-priced orders and increased deliveries from traders. Finished product inventories fell to 2,900 mt, down 200 mt WoW, reflecting faster cargo pick-up by downstream consumers. Overseas, transactions of recycled copper raw materials with invoices at Ningbo Port were active, and inventory in Zhenhai Park remained low. Arrived raw materials could be traded and shipped on the same day if the price was suitable, highlighting the liquidity advantage of imported raw materials.

From the production side, the operating rate of secondary copper rod enterprises this week was 23.33%, up 0.66 percentage points MoM and significantly higher by 7.64 percentage points YoY. This rebound was mainly due to the widening price difference between primary metal and scrap, which expanded to 1,130 yuan/mt (up 184 yuan MoM), and traders' arbitrage activities. As copper prices pulled back in the second half of the week, the price difference between primary metal and scrap narrowed from 2,064 yuan/mt to 1,642 yuan/mt. Traders, after profiting from the futures, needed physical delivery and rushed to pick up goods from secondary copper rod enterprises, leading to a surge in daily average shipments, even requiring temporary increases in operating rates to meet delivery demands. The average discount of secondary copper rod in Jiangxi against copper futures was 570 yuan/mt (up 190 yuan MoM), but the gross profit margin within the week was 35 yuan/mt, down 93 yuan/mt MoM, with profit margins still under pressure.

At the policy level, the wait-and-see sentiment triggered by Document No. 770 continued to ferment. Most enterprises in Jiangxi and Anhui provinces remained shut down, awaiting clear guidelines, with only a small number resuming production under the pressure of output targets, reducing their production frequency to once every 2-3 days, and strictly purchasing raw materials with invoices to avoid risks. The rapid pullback in copper prices led some enterprises to face insufficient raw material procurement, considering an early holiday until after National Day. Regional disparities were evident: the shutdowns in Jiangxi caused orders to flow to neighboring provinces, but the overall supply gap persisted, supporting the "rising tide" in secondary copper rod prices.

Looking ahead to next week, it is expected that suppliers' shipments will gradually recover as copper prices stabilize, and market circulation may rebound slightly. However, a temporary shortage of raw materials might force a few enterprises to take an early holiday, with the operating rate expected to drop back slightly to 22%. In the medium and long-term, the traditional September-October peak season effect has not been significantly felt, with wire and cable enterprises' purchases still driven primarily by essential needs, coupled with high copper prices suppressing demand, limiting the strength of the recovery. Whether the industry can sustain its recovery depends on the implementation pace of Document No. 770 and whether the price difference between primary metal and scrap can maintain a favorable level. Enterprises need to procure imported raw materials with invoices and flexibly adjust their production pace to address challenges, seeking a new balance in the interplay between policy and market.