SMM Cu Survey: Operating Rates Keep Flat in September at Domestic Copper Smelters

SHANGHAI, Sep. 20 (SMM) - A recent SMM survey of 23 major domestic copper smelters (total capacity: 4.163 million mt) revealed the following insights: 
 
1) September Operating Rates at Copper Smelters Flat with August Levels
According to the SMM survey, the average operating rate at the 23 copper smelters is 87.38% in September, almost flat with August’s 87.34%, and slightly higher than the 85% from the same period last year. Most enterprises usually have unit maintenance completed by September, so operating rates always rise in that month. However, scrap copper has recently taken market share from refined copper due to the price gap between the two materials. In addition, frequent fluctuations in copper prices have also made downstream producers cautious towards purchasing, leading to low purchase volumes and limited deals. Long-term contract orders are vital to digest existing stock at some copper smelters, and in this context, copper smelters have made no significant increases in operating rates even as the sector enters a traditional high demand period.

2) Refined Copper Inventories Increase, Raw Material Inventories Sufficient
According to the SMM survey, stocks of refined copper at the surveyed enterprises were 55,050 mt in September, up 8.6% from August’s 50,700 mt. This reflects weaker-than-expected recovery in downstream demand and unwillingness by downstream enterprises to purchase at high prices due to financial risk concerns. In this context, stock replenishment at many enterprises has not materialized as expected by markets. Meanwhile, some copper smelters are reluctant to move goods at current prices given the unclear economic outlook from recent mixed economic results. Given this uncertainty, smelters preferred to stay out of market, leaving transactions quiet and stocks higher.
 
Most copper smelters in the survey reported sufficient supply of raw materials. According to the survey, TC/RC of copper concentrate is now at USD 25-35/mt (2.50-3.50 cents/lbs), a significant increase from the previous USD 17-20/mt (1.70-2.00 cents/lbs), and reflects growing supply of copper concentrate in the market. In addition, scrap copper prices moved higher with rising copper prices, but some cargo-holders were still pessimistic towards the sustainability of high scrap copper prices, choosing instead to sell, helping keep inventories of scrap copper at copper smelters relatively sufficient.

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