September domestic copper cathode production unexpectedly declined and is expected to further decrease in October [SMM Analysis]

In September, SMM copper cathode production decreased by 9,200 mt MoM, a decline of 0.91%, and decreased by 0.76% YoY. From January to September, cumulative production increased by 478,200 mt YoY, an increase of 5.64%.

The main reasons for the unexpected decline in September production are as follows: 1. A major smelter in central China required long-term maintenance due to force majeure, significantly reducing its output; 2. Continued tight supply of blister copper and copper anode led to decreased production at some smelters, as reflected in the continued decline in processing fees for blister copper and copper anode (as of September 27, SMM reported south China domestic blister copper RCs at 800 yuan/mt, down 100 yuan/mt from the previous month; domestic copper anode processing fees at 400 yuan/mt, down 100 yuan/mt from the previous month).

In summary, the sample operating rate of the copper cathode industry in September was 82.6%, down 0.42 percentage points MoM. The operating rate for large smelters was 84.74%, down 0.56 percentage points MoM; for medium smelters, it was 80.60%, down 2.83 percentage points MoM; for small smelters, it was 67.78%, up 5.48 percentage points MoM. The operating rate for smelters using copper concentrate was 86.0%, down 0.3 percentage points MoM; for those not using copper concentrate (using copper scrap or copper anode instead), it was 62.70%, down 2.6 percentage points MoM.

Entering October, according to SMM statistics, five smelters are scheduled for maintenance, involving blister copper capacity of 1.04 million mt, a significant increase from 500,000 mt in September. Additionally, due to tight copper concentrate supply, the ramp-up speed of some newly commissioned smelters has slowed. Coupled with the continued tight supply of blister copper and copper anode, production at some smelters relying on them continues to decline. Under the influence of many unfavourable factors, production in October is expected to continue to decrease.

Based on production schedules, SMM expects October domestic copper cathode production to decrease by 1.08 percentage points MoM and by 0.03 percentage points YoY. From January to October, cumulative production increased by 5.04% YoY, an increase of 477,900 mt. The sample operating rate of the copper cathode industry in October is expected to be 81.53%, down 1.06 percentage points MoM. The operating rate for large smelters is expected to be 83.42%, down 1.32 percentage points MoM; for medium smelters, 78.46%, down 2.14 percentage points MoM; for small smelters, 72.22%, up 4.44 percentage points MoM. The operating rate for smelters using copper concentrate is expected to be 85.1%, down 0.9 percentage points MoM; for those not using copper concentrate (using copper scrap or copper anode instead), it is expected to be 62.50%, down 0.2 percentage points MoM, marking a continuous decline for four months, with further decline expected in the future. Finally, the number of smelters planning maintenance in November will increase to eight, and SMM expects production to continue to decline in November, with production expected to increase again in December as maintenance concludes.