Price difference between copper cathode rod and secondary copper rod widens to 2,200 yuan/mt; hot orders meet losses as rod producers turn cautious [SMM Secondary Copper Rod Weekly Review]

SMM, September 11:

      According to SMM data, the operating rate of secondary copper rod producers stood at 8.74% this week, down 5.29 percentage points WoW and down 13.93 percentage points YoY. Meanwhile, the average price difference between copper cathode rod and secondary copper rod was 1,948 yuan/mt, up 164 yuan/mt WoW. In addition, the average discount of secondary copper rod in Jiangxi against copper futures was 1,376 yuan/mt, widening by 478 yuan/mt WoW. Based on SMM's secondary copper rod sales gross profit model, the average weekly gross profit was 1,020 yuan/mt, down 93 yuan/mt WoW.

      This week (September 7-10), the secondary copper rod market operated against the backdrop of overseas short squeezes driving the most-traded SHFE copper contract sharply higher. The significant rise in the copper price center became the core variable dominating market sentiment and trading in the secondary copper rod market.

      The secondary copper raw material market reversed from ample supply early in the week to tightening by the weekend. Early in the week, while copper prices consolidated at highs, secondary copper raw material traders generally believed that another push above 110,000 yuan would face strong resistance, so they chose to sell into strength. As a result, secondary copper raw material supply was relatively ample in the short term, allowing secondary copper rod producers to maintain normal procurement. After copper prices broke higher, raw material prices rose 300 yuan/mt WoW, but due to the shifting of invoice costs, the price increase for domestic tax-exclusive secondary copper raw materials was limited. Meanwhile, for tax-inclusive materials, scrap utilization enterprises were in no rush to purchase given elevated prices. Subsequently, traders continued to sell, but by September 10, after sustained selling over the previous two days, their inventories were low. In addition, some traders held off selling while waiting for copper prices to reach 115,000 yuan/mt, reducing near-term shipments. The secondary copper raw material sales sentiment index pulled back from 2.95 to 2.89, and market supply tightened again. Raw material prices rose another 300 yuan/mt WoW, and the price difference between copper cathode and copper scrap widened from 3,577 yuan/mt at the start of the week to a weekly high of 5,118 yuan/mt. However, the rapid rise in raw material prices further squeezed the profit margins of rod producers, which were already pressured by tax-inclusive invoice rates holding around 12%.

      Looking ahead, with inventories low, traders are likely to strengthen their tendency to hold back from selling in anticipation of higher prices. Tight raw material supply may continue to push secondary copper rod costs higher, and rod producers' operations and procurement will remain constrained by concerns that taking orders means locking in losses. If the copper price rally slows or pulls back, as traders' willingness to cash in on rallies rebounds and raw material circulation improves marginally, combined with the actual release of orders during the September-October peak season, trading activity in the secondary copper rod market is expected to pick up again. However, until the implementation standards for reverse invoicing are further clarified and tax-inclusive invoice rates decline materially, secondary copper rod producers' profit margins and operating rates will remain significantly constrained, and the market is unlikely to break out of its pulse-like trading pattern characterized by inflated price spreads and cautious physical procurement.

As the world's largest copper consumer, China's industry chain faces three major challenges: rising dependence on upstream resources, overcapacity in midstream processing, and downstream demand suppressed by high copper prices. To help the industry navigate these changes, SMM has partnered with copper industry chain enterprises to jointly compile the bilingual Chinese-English "2026 China Copper Industry Chain Distribution Map." Click this link to receive a free copy of the copper industry chain distribution map: . SMM Co-production Contact: Liu Mingkang 156 5309 0867