Tight Raw Material Supply Limits Recovery of Secondary Copper Rod Operating Rate [SMM Analysis]

According to SMM data, the operating rate of secondary copper rod plants last week was 19.57% (surveyed enterprises: 15, capacity: 1.59 million mt/year), up 0.65 percentage points WoW. This week, the average price spread between copper cathode rods and copper scrap rods was 918 yuan/mt, up 279 yuan/mt from last week's 639 yuan/mt. The average discount against futures contract for secondary copper rod prices in Jiangxi was 413 yuan/mt last week, up 288 yuan/mt WoW.

The recovery of the secondary copper rod operating rate last week was limited, mainly due to difficulties in procuring copper scrap and unclear policies. Some enterprises in Jiangxi reported that the subsidies and tax rebates for July have not yet been issued, leading to thoughts of relocating their factories back to their original provinces. However, some enterprises have received promises from local governments that the subsidies and tax rebates will be issued as early as last week. Currently, most secondary copper rod plants remain shut down, awaiting clearer policies. Enterprises that have resumed operations indicated that if raw materials are not effectively replenished by the end of the week, they might consider halting production this week. Overall, the shortage of raw materials has slowed the recovery of secondary copper rod plants, but policy uncertainty is the biggest factor affecting the continuous production of these plants.

Looking ahead to this week, most secondary copper rod plants currently have enough raw materials to operate until the weekend. If sufficient copper scrap cannot be procured by this Monday, the plants will shut down, and the operating rate will decline.