New Policies in September May Be Delayed, Secondary Copper Rod Enterprises Prepare for Resumption of Work [SMM Analysis]

According to SMM survey data, the operating rate of secondary copper rod enterprises in September was 27.76%, up 4.39 percentage points MoM, but down 17.79 percentage points YoY. Among them, the operating rate of large enterprises was 22%, medium-sized enterprises 28.51%, and small enterprises 59.57% (surveyed enterprises: 49, capacity 5.32 million mt/year).

The operating rate of secondary copper rods in September recorded 27.76%, higher than the forecasted 26.16%. According to SMM survey, many secondary copper rod plants resumed production in September, but as copper prices fell to 71,500 yuan/mt, copper scrap holders held back cargoes, affecting the operating rate of secondary copper rod plants. After the Mid-Autumn Festival, news spread in Jiangxi that the implementation of the Fair Competition Review Regulations might be delayed until 2028. Many local secondary copper rod plants resumed copper scrap procurement and quickly rehired previously dismissed production line workers. In mid-to-late September, the US Fed released news of an interest rate cut, coupled with multiple favorable policies from the domestic central bank, driving copper prices higher under macro factors. Copper scrap holders took advantage of the high prices to sell, and secondary copper rod plants aimed to complete stocking before the National Day holiday. At the end of September, the price difference between copper cathode rod and secondary copper rod once expanded to 1,600 yuan/mt, reviving the substitution effect of secondary copper rods. However, end-use sectors showed increasing caution towards high prices, and wire and cable enterprises, with limited orders on hand, were reluctant to stock up on secondary copper rods before the holiday. Additionally, in September, the average discount of secondary copper rod against futures prices was 370 yuan/mt, slightly lower than the copper anode processing fees of 400 yuan/mt, prompting more secondary copper rod plants to produce secondary copper rods. The gradual clarification of policies led to the resumption of work and production of secondary copper rods in south China, steadily increasing the operating rate of secondary copper rods.

In September, the raw material inventory of secondary copper rod enterprises was 17,500 mt.

The relaxation of the No.783 policy in Jiangxi after the Mid-Autumn Festival led to the resumption of raw material procurement by most secondary copper rod plants in Jiangxi, which also affected Jiangsu, Hubei, Hunan, and other regions. The rise in copper prices also boosted the sentiment of copper scrap holders to sell, increasing the raw material inventory of secondary copper rod enterprises from 7,700 mt to 17,500 mt. The expected decline in copper prices in October will affect the circulation of copper scrap in the market, and the raw material inventory of secondary copper rods is expected to drop back slightly.

The operating rate of secondary copper rods is expected to be 23.46% in October 2024.

According to SMM data forecasts, the operating rate of secondary copper rods in October 2024 is expected to be 23.46%, down 4.3 percentage points MoM and 18.02 percentage points YoY. Secondary copper rod plants originally planned to give workers 1-2 days off during the national holiday, but due to excessive finished product inventories or insufficient raw material procurement, the actual days off extended to 4-7 days. After the holiday, falling copper prices and high raw material costs made it difficult for secondary copper rod enterprises to continue operating. Additionally, secondary copper rod enterprises indicated that the Jiangxi local government had negotiated new business plans, with related policies no longer as favorable as before. It is expected that the invoice tax rate for enterprises will increase, leading some secondary copper rod plants in Jiangxi to consider resuming production after the Chinese New Year next year or temporarily halting production for 1-2 weeks, waiting for copper prices to stabilize before resuming production. These factors are expected to lower the operating rate of secondary copper rod enterprises in October.