October: Resumption of Secondary Copper Rod Plants in Jiangxi and Hunan, Slight Increase in Operating Rate of Secondary Copper Rod Plants [SMM Analysis]

According to the SMM survey, the operating rate of secondary copper rod enterprises in October was 29.07%, up 0.19 percentage points MoM and down 12.63 percentage points YoY. Among them, the operating rate of large enterprises was 13.72%, medium-sized enterprises 37.05%, and small enterprises 47% (surveyed enterprises: 49, capacity 5.32 million mt/year).

The operating rate of secondary copper rod enterprises in October recorded 29.07%, lower than the forecast of 32.84%. According to the SMM survey, many secondary copper rod plants had to shut down during the National Day holiday due to insufficient arrivals of secondary copper raw materials. After the holiday, copper prices fell from 78,000 yuan/mt to 77,000 yuan/mt, and secondary copper raw material suppliers held back cargoes. Subsequently, copper prices fluctuated in the range of 76,000-78,000 yuan/mt, and secondary copper raw material suppliers stood firm on quotes. The price difference between copper cathode and copper scrap remained below 1,000 yuan/mt for most of October, showing a very tight supply of secondary copper raw materials in the market. Many secondary copper rod plants reported that there were very few low-priced secondary copper raw materials available in the market. If secondary copper raw materials were purchased at market prices, the raw material prices would even be 100-200 yuan/mt higher than the tax-free secondary copper rod prices. Under the condition of inverted raw material and finished product prices, secondary copper rod plants only maintained procurement for just-in-time needs. Meanwhile, the high prices of secondary copper raw materials also caused the price spread between copper cathode rods and secondary copper rods to fall from 944 yuan/mt to 840 yuan/mt. End-use wire and cable enterprises preferred to purchase copper cathode rods, leading to a cooling demand for secondary copper rods. In terms of processing fees, the average discount of secondary copper rod against futures was 347 yuan/mt in October, while the discount for copper anode against futures was 400 yuan/mt. However, considering the high prices of secondary copper raw materials and weak downstream end-use demand, small and medium-sized secondary copper rod plants maintained normal production to ensure sales profits. Large secondary copper rod plants had to bear small losses to produce copper anode due to the need to fulfill long-term contracts. Near the month-end, a small number of secondary copper rod plants in Hunan and Jiangxi resumed procurement of secondary copper raw materials after receiving government notices urging resumption of production, leading to a slight increase in the operating rate of secondary copper rod plants in October.

The raw material inventory of secondary copper rod enterprises in October was 15,800 mt

In October, the fluctuation in copper prices caused secondary copper raw material suppliers to hold back cargoes. Additionally, weak end-use demand led secondary copper rod plants to maintain just-in-time procurement. Secondary copper rod plants also reported that the port arrivals of secondary copper raw materials in Ningbo Zhenhai were significantly lower in October. Previously, they could purchase 100 mt of imported secondary copper raw materials daily in Zhenhai, but in October, it was very difficult to purchase even 30 mt daily. The raw material inventory of secondary copper rod plants in October was 15,800 mt, down 1,900 mt from 17,700 mt in September. After the US election in November, Trump taking office may trigger concerns about a global economic recession, affecting copper prices and further tightening the supply of secondary copper raw materials.

The operating rate of secondary copper rod plants is expected to be 30.33% in November 2024

According to SMM data forecasts, the operating rate of secondary copper rod plants in November 2024 is expected to be 30.33%, up 1.26 percentage points MoM and down 20.83 percentage points YoY. Although secondary copper rod plants in Jiangxi and Hunan are gradually resuming production, reports from Anhui indicate that many secondary copper rod plants are choosing to reduce or even halt production due to restrictions on input invoice quotas. Coupled with the impact of overseas macro factors, the market sentiment towards copper prices is bearish. Secondary copper rod plants may not be able to procure enough secondary copper raw materials for production, thus limiting the increase in the operating rate of secondary copper rod plants in November.