Long-term Profit Compression May Lead Secondary Copper Rod Plants to Consider Halting Production [SMM Analysis]

According to SMM survey, the operating rate of secondary copper rod plants last week was 20.41% (surveyed enterprises: 18, capacity: 1.94 million mt/year), down 3.71 percentage points WoW. Last week, the average price spread between copper cathode rods and secondary copper rods was 895 yuan/mt, down 160 yuan/mt compared to 1,055 yuan/mt two weeks ago. The average discount of secondary copper rod in Jiangxi last week was 442 yuan/mt, up 35 yuan/mt WoW.

According to SMM survey, although the discount of secondary copper rods meeting national standards in Jiangxi was 200-300 yuan/mt in the latter half of the week, and the sales price was 300-400 yuan/mt higher than copper anode, the high copper scrap prices led to raw material prices being once 100-200 yuan/mt higher than the tax-free secondary copper rod prices. Even though the processing fee of secondary copper rods was better than that of copper anode, the high raw material prices resulted in no profit for secondary copper rod plants. Additionally, the increased tax invoice management for secondary copper rod enterprises in Anhui caused many secondary copper rod plants to decide to halt production and wait. This situation led to a decline in the operating rate of secondary copper rod plants last week.

Looking ahead to this week, the operating rate of secondary copper rod plants is expected to remain unchanged if end-use demand persists.