Copper prices plunged in early August, and the production of copper cathode rods exceeded expectations [SMM Analysis]

According to SMM data, the total production of copper cathode rods in August nationwide amounted to 923,400 mt, an increase of 72,400 mt from July, with an operating rate of 69.35%, an increase of 4.21 percentage points MoM, and up 3.78 percentage points YoY. In east China, the total production of copper rods was 587,300 mt, with an operating rate of 73.35%, up 5.92 percentage points YoY; in south China, the total production of copper rods was 148,800 mt, with an operating rate of 71.86%, up 2.35 percentage points YoY. (For production and operating rate data in other regions, see the SMM database)

In early August, copper prices dropped sharply, once reaching above 70,000 yuan/mt. The sharp decline in copper prices led to a significant release of orders, followed by a gradual increase in the price center in the latter half of the month. According to SMM data, the average price of SMM #1 copper cathode in August was 73,130.23 yuan/mt, a decrease of 4,248.9 yuan/mt from July. Meanwhile, the average price spread between copper cathode rods and secondary copper rods in August was 640 yuan/mt, narrowing by 79 yuan/mt from July. At the same time, the operating rate of secondary copper rod plants remained low, continuing to drive orders towards copper cathode rods. Overall, the significant drop in copper prices led to a boom in order volumes, with August’s copper cathode rod production exceeding expectations and continuing to show YoY growth, with the operating rate up 3.78 percentage points YoY.

A large release of orders in September supported scheduled production, with an optimistic outlook for consumption

In early September, copper prices again dropped sharply, and some enterprises reported that previously announced power grid orders had gradually started to be released, especially during the period when copper prices were at a low level at the beginning of the month. Downstream orders for copper cathode rods also increased significantly, with sufficient scheduled production. Additionally, most copper cathode rod makers remained optimistic about downstream stockpiling before the National Day holiday, and the operating rate of secondary copper rod plants had not recovered. As of the date of statistics, the national production of copper cathode rods in September is expected to continue to grow to 938,400 mt, with the operating rate up 1.13 percentage points MoM. However, it should be noted that copper cathode rod companies remain generally concerned about copper prices; if copper prices continue to rise, downstream consumption and delivery pace may be suppressed again, affecting downstream stockpiling before the National Day holiday.