According to the SMM survey, the operating rate of secondary copper rod makers in August was 23.37%, down 11.12 percentage points MoM and 24.19 percentage points YoY. Among them, the operating rate of large enterprises was 24.74%, medium-sized enterprises 21.45%, and small enterprises 34.93% (surveyed enterprises: 49, capacity: 5.32 million mt/year).
The operating rate of secondary copper rod makers in August recorded 23.37%, lower than the forecast of 24.17%. In the first month of the implementation of the Fair Competition Review Regulations, the operating performance of secondary copper rod plants in the north and south of China diverged. In some areas of south China, local governments have clearly stated that policies will be uniformly applied, meaning that from August, the government will cancel related tax policies and incentive subsidies. According to the SMM survey, the actual VAT rate for secondary copper rod plants will increase by at least 4.5% after the new policy implementation, which means that secondary copper rod makers will bear an additional tax cost of 3,500 yuan for every ton of secondary copper rod sold. Therefore, most secondary copper rod plants in the south have maintained a shutdown status, while those in the north seem unaffected and continue normal production and sales.
In mid-to-late August, after secondary copper rod makers paid the relevant taxes for July and received the local government's promise to issue July's subsidies, they began to resume production. To prevent the government from not issuing the relevant subsidies in August, secondary copper rod plants prioritized purchasing copper scrap with invoices. After a significant drop in copper prices in July, the rebound was limited, and the supply of low-priced copper scrap in the market was insufficient, forcing secondary copper rod plants to reduce production due to inadequate raw material procurement. Near the end of the month, some secondary copper rod plants reported producing one batch of low-oxygen rods every three days. Unclear policies and tight supply of copper scrap have led to a slow recovery in the operating rate of secondary copper rod plants.
The raw material inventory of secondary copper rod makers in August was 7,700 mt.
Although copper prices stopped falling and rebounded in August, the increase was limited. Copper scrap holders mainly held onto their stock in anticipation of higher prices. Additionally, throughout August, copper scrap buyers generally reported significant difficulties in procurement, with some yards' monthly procurement volume only one-third of July's. These reasons led to secondary copper rod plants maintaining low raw material inventories even after resuming production. The raw material inventory of secondary copper rod plants in August decreased by 300 mt MoM. If copper prices remain at mid-to-low levels in September, the supply of copper scrap will not improve.
The operating rate of secondary copper rod makers is expected to be 25.7% in September 2024.
According to SMM data forecasts, the operating rate of secondary copper rod makers in September 2024 is expected to be 25.7%, up 2.33 percentage points MoM and down 19.85 percentage points YoY. At the beginning of September, due to the long-term shutdown of secondary copper rod plants, the normal production of end-user wire and cable companies has been affected. To maintain long-established customer resources, secondary copper rod plants are forced to resume production. However, due to the tight supply of copper scrap, the recovery in the operating rate of secondary copper rod plants in September will be limited.
