Premier Li Qiang of the State Council signed a State Council decree, announcing the "Fair Competition Review Regulations" (hereinafter referred to as the "Regulations"), which came into effect on August 1, 2024. It has been three weeks since its implementation and over four months since the "reverse invoicing" policy was introduced. How are these two policies being implemented currently? What is the actual situation and performance of the northern secondary copper rod market? To what extent have the operating rates of secondary copper rod plants recovered? What is the future market trend? The following is a detailed analysis based on market research.
Since the promulgation of the reverse invoicing policy and the "Regulations," the operating rate of secondary copper rods has experienced two significant declines, dropping to 15.53% after the official implementation date specified in the "Regulations." The main reason is the market concern due to the lack of clarity on specific implementation methods as the official date approached. Additionally, the market saw a unified rush to deliver and complete orders before August 1, leading to a halt in production and a wait-and-see approach. In August, the market faced a shortage of copper scrap and short-term price chaos.
At the same time, after July, the focus of copper prices fell, and the price spread between copper cathode and secondary copper rods also declined, significantly reducing the economic advantage of secondary copper rods, which further dampened the confidence of some secondary rod makers in resuming production.
Unlike the market's wait-and-see attitude in early August, the operating rate of secondary rod plants began to pick up from the second week of August, with a few enterprises resuming production. The operating rate of northern secondary copper rod plants is gradually recovering, mainly due to two reasons:
First, some major enterprises have increased their procurement of imported taxed copper scrap to restore normal production and shipments. However, since the volume of imported copper scrap cannot meet the entire production demand, domestic procurement or intermittent production is still necessary.
Second, during the buffer period of policy implementation, there is still a considerable flow of untaxed copper scrap. As the new policy is gradually implemented, untaxed copper scrap has flowed into the north to supplement supplies, also promoting the slow recovery of the operating rate.
Looking ahead, the northern market has begun to see copper rod makers reporting taxed copper scrap prices in their procurement. However, objectively, it is difficult to find domestic taxed supplies. Relying entirely on imported taxed copper scrap makes continuous production challenging. Additionally, enterprises are still unclear about the subsequent local implementation details. Overall, maintaining previous procurement methods or implementing reverse invoicing still requires confidence support. It is expected that the operating rate may continue to rise slightly, but returning to normal levels is quite difficult. More clear market guidance may emerge by the end of August or September. SMM will continue to provide you with updates.
