The operating rates of copper rod plants using copper scrap were 40.71% between August 11 and August 17, a drop of 3.73 percentage points from a week earlier, according to SMM survey of 15 plants with a capacity of 1.48 million mt/year). On the supply side, some copper rod plants using copper scrap as raw materials curtailed production last week due to tight supply of raw materials. Some plants turned to purchase copper cathode with poor quality instead to secure the delivery of orders.
On the consumption side, the supply of copper rod produced with copper scrap was tight, leading to premiums against the SHFE front-month copper contract prices. As of Thursday, the premium in Jiangxi against the SHFE front-month copper contract stood at 440 yuan/mt. Electric copper rod in east China was quoted with premiums of 1,020 yuan/mt over the contract, with the price spread of 580 yuan/mt between copper cathode rod and copper rod produced with copper scrap. As the economic advantage faded, the consumption of copper rod produced with copper scrap was depressed.
This week, any further tightening of copper scrap will force more copper rod plants using copper scrap as raw material to halt production, which will reduce spot supplies further. Some copper rod plants using copper scrap as raw material may purchase copper rod produced with copper cathode to deliver some orders after halting production. This will boost the consumption of copper rod produced with copper cathode, thereby bolstering operating rates.
