Review and Outlook of Copper Cathode Rod Market, 2024-25: What Are the Key Words? [SMM Analysis]

As 2024 approaches its end, the copper cathode rod market is set to face new challenges in 2025. Nearing year-end, how have copper cathode rod producers performed in terms of production and sales this year? Is there still a gap to the annual target? What are the expectations for 2025, and what changes are anticipated in the copper rod market next year? Below is the detailed analysis:

1. Copper Prices Surge While Spot Premiums/Discounts Fluctuate; Annual Average Premiums/Discounts Negative, Long-Term Contracts Suffer Heavy Losses

In H1 2024, driven by copper concentrate shortages, expectations for copper cathode production cuts, domestic favourable macro front policies, and disruptions such as COMEX short squeezes, copper prices surged to record highs. SMM #1 copper cathode spot premiums/discounts also experienced significant volatility throughout the year. As of December 25, 2024, the annual average spot premium for SMM #1 copper cathode stood at -27.39 yuan/mt. For most of the year, spot premiums/discounts were significantly lower than long-term contract prices, leading to severe losses for downstream customers of copper cathode rod long-term contracts and resulting in widespread contract defaults.

2. High Copper Prices Suppress Operating Rates and Processing Fees of Copper Cathode Rods

Under the pressure of high copper prices, the weekly operating rates of copper cathode rod producers throughout the year showed a strong correlation with copper prices. Rising raw material costs, widespread long-term contract defaults, and intensified wait-and-see sentiment among downstream customers all weighed on operating rates during periods of high copper prices, while orders were concentratedly released during price declines.

In terms of processing fees, the processing fees for rods used in the power and enamelled wire industries (excluding premiums/discounts) repeatedly declined during the copper price jump initially and then pull back trend in 2024, before gradually rebounding to normal levels.

3. Capacity Expansion Intensifies Cut-Throat Competition; Enterprises Seek Breakthroughs

According to SMM, copper cathode rod capacity in 2024 increased by 1.425 million mt YoY compared to 2023, while operating rates declined by 2.2 percentage points YoY. Meanwhile, an additional 1.195 million mt of capacity is expected to be released in 2025. Amid increasing capacity and intensifying cut-throat competition, copper cathode rod enterprises are actively seeking breakthroughs, with some exploring copper rod export channels, considering the addition of oxygen-free rod production lines, or expanding supply chains and downstream customer bases. Copper rod and wire exports in 2024 increased by nearly 60% YoY. Additionally, multiple copper rod enterprises reported a growing number of supply chain companies participating in transactions.

4. Review and Outlook of Production Targets for 2024/25: Export Reduction Likely in 2025

Despite the pressure on operating rates and profit margins in 2024, and the drag on copper consumption growth from the real estate and infrastructure sectors, domestic consumption remained fundamentally supported. Backlog orders from mid-2024 were largely released in Q3 and Q4. The increase in export orders and incremental demand for copper in the new energy sector also provided some support. Meanwhile, reduced secondary copper rod supply due to new policies indirectly boosted the rebound in copper cathode rod operating rates. Based on exchanges between SMM and copper cathode rod enterprises, while it was challenging to achieve the annual growth target for total production in 2024, most medium and large copper cathode rod enterprises managed to maintain flat or slightly increased production levels compared to 2023.

SMM expects copper cathode rod capacity to continue expanding in 2025, with production and apparent demand growth slowing. Annual operating rates are likely to decline further, down 3.34 percentage points YoY. Although many enterprises aim to expand exports, policy changes shifting the market from Ordinary Trade to processing trade have halved export volumes for major domestic exporters as of December. Additionally, rising processing fees have increased difficulties in market expansion. SMM forecasts that copper wire rod exports will shrink by approximately 80,000 mt in 2025.

In summary, despite market volatility in 2024, the domestic market remained fundamentally stable. However, in 2025, enterprises are expected to face challenges such as overcapacity, cut-throat competition, and compressed profit margins. With export restrictions, more surplus capacity may flow to east and south China, involving more supply chain enterprises in circulation. Enterprises must find their own solutions to these challenges. SMM will continue to monitor the evolving substitution relationship between copper cathode and secondary copper rods, changes in market supply and demand, and developments in import and export dynamics.