[SMM Analysis] the operating rate of copper scrap rod continued to fall sharply in May at a loss.

SMM6, 19th, news:

According to SMM survey data, the operating rate of scrap copper rod enterprises in May was 54.44%, a decrease of 12.54 percentage points from the previous month and 20.74 percentage points from the same period last year.

In May, the start-up rate of scrap copper rods fell sharply again. In May, the escalation of trade friction between China and the United States once again triggered a plunge in copper prices, copper prices broke continuously, the supply of superimposed scrap copper was scarce, and the difference between refined scrap price and April continued to narrow. The monthly average refined scrap price difference was only 831 yuan per ton. Copper scrap consumption advantage is not at all, scrap copper market is weak in supply and demand. Some enterprises feedback that the current scrap copper rod market in recent years the worst performance. At the beginning of the year, due to the warming of the market, some enterprises that stopped production last year due to environmental protection benefits and other problems resumed production, and at the same time, the supply of domestic scrap copper is expected to shrink, both of which have exacerbated the tense pattern of domestic scrap copper supply this year. as a result, the price of scrap copper is on the high side this year, and the sentiment of traders to cherish and sell at low prices is even more obvious. Whether early tax cuts or problems in China and the United States in May led to a drop in copper prices, the weakening of scrap copper consumption advantage has also put further pressure on this year's scrap copper rod makers.

In April, as the tax price gap narrowed to about 1,000 yuan, refined copper and scrap copper could not be replaced. Scrap copper in May provided some support for refined copper consumption, accelerated the pace of domestic storage, but also gave imported copper a certain opportunity. At present, the price difference between refined copper rod and scrap copper rod is about 500 yuan, and the substitution between the two is obvious. The extrusion of refined copper to the scrap copper market is also one of the reasons why the operating rate of refined copper rod rebounded by nearly 4 percentage points in May compared with the previous month. From the consumption of copper rod terminal power industry, there is no particularly good performance.

According to the SMM survey, the operating rate of scrap copper rod enterprises is expected to be 48.20% in June, a further decrease of 6.24% from the previous month and a decrease of 27.32% from the same period last year.

At present, copper scrap rod-making enterprises are already in a state of loss, and most of them are still barely maintaining production, and some enterprises have stopped production in June because of their poor efficiency, resulting in a further decline in the opening rate in June. Some enterprises because of the domestic scrap copper acquisition is more difficult, will also purchase part of the imported scrap copper in Zhejiang as a raw material supplement.

There is a good chance that the import of scrap copper will shrink to a certain extent in the second half of today, but it is only a matter of the size of the gap. At a time when the supply of scrap copper is expected to tighten, it is difficult to widen the price gap by increasing the supply of scrap copper to lower the price of scrap copper, then copper prices can only rise, but if copper prices remain weak, then the gap between refined scrap prices will be difficult to widen. Scrap copper can still be a supporting force for refined copper consumption this year.

(SMM Wei Xue)