Invoice restrictions limit tax-exclusive supply circulation, price increase limited [SMM Secondary Copper Raw Material Weekly Review]

SMM News on September 24:

       This week, the price difference between copper cathode and copper scrap continued to widen from 3,141 yuan/mt at the beginning of the week to an intra-week high of 4,626 yuan/mt. The copper scrap market saw an unusual phenomenon of “falling with the downside but not rising with the upside”—when copper prices rose sharply, raw material prices only edged up slightly (up 300 yuan/mt WoW at the beginning of the week and up 200 yuan/mt mid-week), but when copper prices pulled back from highs, raw materials followed the decline and were marked down (down 200 yuan/mt WoW at the end of the week, then down another 100 yuan/mt). This pattern of lagging on the upside and following on the downside left some high-priced inventory held by traders unsellable. Even when copper prices shot up to 111,570 yuan/mt, secondary copper rod enterprises were unable to bear the high raw material prices and kept their raw material quotations unchanged, resulting in almost no transactions in the copper scrap market intraday. Suppliers generally complained that high-priced inventory was difficult to digest. The sales sentiment index fell from 2.71 to 2.61, and willingness to sell fluctuated with copper prices but remained unable to scale up shipments. Meanwhile, invoice issues brought about by reverse invoicing erupted in a concentrated manner ahead of the holiday. Although many secondary copper rod enterprises wanted to procure as much raw material as possible to stock up raw materials, suppliers were unable to resolve the invoicing issues. Procurement volume at scrap utilization enterprises was extremely limited, and the supply side as a whole showed the characteristics of “available cargo that is hard to sell, a buildup of high-priced inventory, and invoices constraining circulation.”

       Looking ahead to next week, the copper scrap market is still expected to center on competition for tax-included cargo. Many scrap utilization enterprises said their raw material procurement was insufficient, forcing them to suspend production during the holiday period.