SMM Copper Concentrate Port Inventory is High: Are Smelters Preparing for BM Negotiations? [SMM Analysis]

Recently, several market observers have noted that SMM copper concentrate port inventory is high, leading to curiosity about whether Chinese copper smelters are preparing for Q4 BM negotiations. Can high raw material inventory help smelters achieve a certain degree of spot TC recovery? Or what is causing the recent accumulation of copper concentrate at ports?

Firstly, the current high copper concentrate port inventory is not a preparation for BM negotiations by smelters but rather a result of the normal raw material procurement rhythm. If smelters want to accumulate leverage for BM negotiations, they should do so by reducing production or adjusting the input volume in the rough refining stage.

Secondly, the level of copper concentrate port inventory cannot help smelters achieve a spot TC recovery. Although it appears that the absolute level of SMM nine-port copper concentrate inventory is high, smelters manage their raw material inventory to avoid capital occupation issues, keeping it at a reasonable level. Typically, smelters set their raw material inventory level to last about four days to a week. Therefore, even though the absolute level of SMM nine-port copper concentrate inventory seems high, it is only enough for smelters to use for about a week and cannot help them achieve a spot TC recovery.

Lastly, if we look at the recent SMM copper concentrate nine-port port inventory data, it naturally seems high. However, the SMM started including inventory data from Nanjing Port and Qinzhou Port on April 19, 2024, so recent inventory level comparisons should not include this part of the inventory. We can clearly see that if we exclude the impact of Nanjing Port and Qinzhou Port, the SMM seven-port copper concentrate port inventory is not at a high level but rather at an average level. The recent rapid accumulation of copper concentrate at ports is mainly at Nanjing Port and Fangchenggang Port. The rapid accumulation at Nanjing Port is due to the concentrated arrivals of raw materials previously purchased by smelters using river ports. The rapid accumulation at Fangchenggang Port is mainly because Yunnan Copper's new project rough refining equipment is scheduled to go online in August, and they are preparing raw materials. Additionally, it is worth mentioning that when we look at the SMM seven-port copper concentrate inventory data, we can see a recent downward trend. This is because, by August, fewer smelters are undergoing maintenance activities compared to July, and more smelters are starting to resume copper concentrate input.