Chinese Secondary Copper Rod Industry Faces Short-Term Pain and Long-Term Restructuring

Recently, the secondary copper rod market is at a critical stage where policy adjustments and market fundamentals are interacting. According to the latest data, the operating rate for secondary copper rod this week was 22.67%, up significantly by 9.15 percentage points WoW and also rising 10.38 percentage points YoY. This change was mainly driven by the resumption of normal operations by enterprises in Tianjin and Anhui. However, in Jiangxi, a key capacity hub, enterprises have largely remained shut down and adopted a wait-and-see approach due to unclear policies, only resuming quotations without restarting production.

Price-wise, the average price difference between copper cathode rod and secondary copper rod was 946 yuan/mt, narrowing by 137 yuan WoW. The average discount of secondary copper rod in Jiangxi against copper futures remained at 380 yuan/mt, narrowing by 76 yuan/mt WoW. Notably, the industry's weekly gross profit reached 128 yuan/mt, achieving its first turnaround since H2 this year, expanding by 85.4 yuan/mt WoW. The improvement in profitability was mainly due to the supply gap widening as a result of shutdowns in Jiangxi, which drove up secondary copper rod prices, coupled with active production resumptions by enterprises in surrounding provinces competing for orders.

Policy uncertainty remains the core disruptive factor in the current market. The notice "On Standardizing the Implementation of Policies Related to Investment Attraction" (NDRC Reform [2025] No. 770, hereinafter referred to as "No. 770 Document"), jointly issued by the National Development and Reform Commission and four other ministries, requires the cleanup of irregular tax rebates and subsidy policies across regions, potentially increasing the actual tax burden for enterprises by at least 5%.

Enterprises in Jiangxi, Anhui, and other areas have chosen to halt production while awaiting specific guidelines, relying solely on imported raw materials with proper documentation to maintain partial operations and avoid tax risks. It is estimated that the national production of secondary copper rod in August decreased by about 30% (48,800 mt) due to policy impacts, and anode plate production also fell by 20%. The structural tightness in raw material supply persists. Despite the rise in copper prices, traders of recycled copper raw materials have not seen a significant increase in purchase volumes, and it is expected that supply will only significantly improve once copper prices reach 83,000 yuan/mt. Sample enterprises' raw material inventory stands at 5,700 mt, up 1,200 mt MoM, as companies stockpile in advance to prepare for potential shutdowns. Downstream demand exhibits characteristics of an underperforming peak season; the traditional September-October peak season has not brought a substantial increase in orders, with most wire and cable enterprises maintaining purchasing as needed, showing a clear fear of high prices.

Looking ahead, the market will still be dominated by policy in the short term. If the detailed rules of No. 770 Document are implemented strictly, the increased tax burden will further squeeze profits, leading to a period of adjustment for the industry. However, in the medium and long-term, the policy cleanup will help standardize market order, driving the industry towards technology-driven and resource efficiency improvements. Copper price trends are also a key variable; expectations for US Fed interest rate cuts may boost risk asset prices, but the dampening effect of high copper prices on consumption cannot be ignored. The operating rate is expected to rise to 26.38% next week, but the sustainability of recovery depends on the clarity of policies and substantial improvement in end-use demand. Overall, the secondary copper rod industry is undergoing a deep adjustment and restructuring. Enterprises need to flexibly employ strategies such as purchasing raw materials with proper documentation, adjusting production pace, and regional collaboration to address challenges and seek new equilibrium points in the dual game of policy and market.