[Cu] SMM Survey - Operating Rates at Copper Smelters in September

SHANGHAI, Sept. 30 (SMM) -- A recent SMM survey of 24 major domestic copper smelters (total capacity: 4.243 million mt/yr) revealed the following insights:

    1) Operating Rates

    According to the survey, the average operating rate at the 24 copper smelters was 85% during September, up 4.3% MoM, and up 8.9% YoY. Operating rates at large smelters have reached 99.4%, since they have had to operate at almost full capacity in an effort to complete production plans by the end of this year. In addition, operating rates at small smelters were significantly higher compared to August levels, since most small smelters use scrap copper as raw material, and market supply of scrap copper has improved recently. 

    2) Inventories

    Domestic TC/RC is quoted at USD 5-18/mt or Cents 5.0-1.8/lbs in view of falling TC/RC.  The SHFE/LME copper price ratio remains low, squeezing profit margins for smelters using imported copper concentrate as raw material. However, most smelters held long-term orders for copper concentrate supply, and improving scrap copper supply also helped offset pressure from tight supply of copper concentrate.  In this context, copper smelters say current raw material inventories are able to meet production needs.

    3) Forecast for Copper Prices in October

    According to the survey, 50% of smelters predict copper prices will continue to fluctuate in October. They said they were uncertain about LME copper prices during China’s National Day holiday, but current upward momentum for copper prices was worse from previous levels, and LME copper prices received greater pressure at USD 6,500/mt, and SHFE copper prices found greater pressure at RMB 50,000/mt as well. In the mean time, the higher purchasing interest upon lower prices will help support copper prices, so copper prices will keep fluctuating from late September to early October.

    29% of smelters believe copper prices will edge down for several reasons.

    First, capital pressure will gradually surface by the end of this year. Meanwhile, the proportion of SHFE copper margins increased recently, and the sales of new shares in securities markets triggered the outflow of funds, which will exert negative impact on copper prices.

    Second, constantly significant increases in both LME and SHFE copper inventories signal weak market fundamentals, and the sluggish consumption during seasonal peak demand period also exerts downward pressure on copper prices.

    Third, market players became more cautious about market sentiment during China’s National Day holiday, and lower positions in futures market also indicate shortages of market confidence. In summary, copper prices will face some reductions.

    The remaining 21% of smelters predict copper prices will rise. They said leaders in all countries will release positive economic signals during G20 Summit in an attempt to boost investor confidence. In addition, the US dollar continued to set new lows, which will drive up LME copper prices. In this context, copper prices will likely set a new high for the foreseeable future.

Copyright © 2009, CBI (Shanghai) Co., Ltd. All Rights Reserved.

None of this material may be used for any commercial or public use in any form or means, without the prior written consent of CBI China. For reproduction issue, please contact us by email: metalresearch@cbichina.com or tel:86-21-51550040