1.Operating Rates Of Copper Rods Plants Using Copper Scrap Plunged On Difficulties In Purchasing Copper Scrap

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.

2. Copper prices plummeted as China economic data disappointed market

Last week, a barrage of Chinese economic data, including the industrial added value, total retail sales of social commodities, fixed asset investment, real estate investment and commercial housing sales as well as unemployment rate issued by the National Bureau of Statistics, disappointed the market. This came after the Purchasing Managers' Index (PMI), Consumer Price Index (CPI), Producer Price Index (PPI) as well as commodity import and export data indicated that China's domestic demand is still weak with excess supply, and economic recovery is slow. The market's confidence in China's economic development has thus been depressed, weighing on the Chinese yuan.

The People's Bank of China lowered the reverse repurchase, medium-term and standing lending rates but that failed to bolster the weakening market confidence in China's economic development. US retail sales in July rose 0.7%, exceeding the expected 0.4% growth, and marking the largest increase since January 2023. The US index rose rapidly after the data was released. The "horror data" show that the US economy is still in expansion. And market expectations for a soft landing of the US economy grew. As such, the US dollar index will remain strong in the short term. The moderate GDP growth in the eurozone in the second quarter was in line with market expectations. On fundamentals, the pick-up in orders raised operating rates at copper rod plants using copper cathode as raw material last week.

In aggregate, copper prices will lack the impetus to rise. Consumption will remain resilient. Aggressive downstream purchases amid lower copper prices, together with the low social inventory, will underpin copper prices. The most active SHFE copper contract prices are expected to move between 67,000-68,500/mt this week, and LME copper will trade between $8,100-8,450/mt. Spot premiums in Shanghai are expected to fall to 300-550 yuan/mt this week.

 

3. Imported Copper Concentrate Index (Weekly) fell after rising for 21 consecutive weeks

As of August 18, the  Imported Copper Concentrate Index (Weekly) stood at $93.35/mt, $0.68/mt lower than a week earlier, falling for the first time after rising for 21 consecutive weeks. The spot market continued to be quiet last week. During the week, smelters' inquiries to traders for clean ore and mixed ore scheduled in September increased significantly. But traders’ inventories of such cargoes were limited. The price coefficient of Cu 20% domestic ore stood at 88.5-89.5%.

 

According to analysis, the  Imported Copper Concentrate Index may peak and fall in the near term. Inquiries of buyers for clean ore scheduled in September stood at $95/mt, while the sellers offered the TCs in the low $90s. Traded TCs between mines and smelters have remained in the high $80s for over a month, and those between traders and smelters did not breach $95/mt. Therefore, SMM believes that the spot TCs of copper concentrate will fall. Some market participants said that even with the unexpected growth in inquiries from Chinese buyers, the spot TCs for copper concentrate can only fall back to the high $80s.

 

According to  survey, the technical upgrading project of a smelter in central China may be completed in October. The copper smelting technology innovation and upgrading project of Baiyin Nonferrous is expected to be put into operation at the end of August, and feeding will begin in October. A smelter in north-east China has completed the first annual maintenance and will commence the second maintenance (technical upgrading at smelting line) at the end of the year. The market expects that the phase II project of a smelter in south China will be completed in October-November ahead of schedule before the feeding is started.

4. Copper Prices Moved At Low Levels As Market Awaiting More Data Guidance

LME copper prices closed at $8,276/mt last Friday evening, a rise of 0.51%. Trading volume was 12,000 lots and open interest stood at 280,000 lots. The most active SHFE 2309 copper contract prices closed at 68,230 yuan/mt overnight, a drop of 0.1%. Trading volume was 17,000 lots, and open interest stood at 148,000 lots.

Macroscopically, the issuance scale of U.S. treasury bonds has surged in the third quarter of this year. The new issuance scale of U.S. treasury bonds will hit a record high in the same period. The cost of issuance continues to rise. The market is more worried about the U.S. debt problem.

Data showed that as of Friday August 18, copper inventory across major Chinese markets stood at 74,800 mt, down 7,800 mt from last Monday and down 17,700 mt from two Fridays ago. Inventories hit the lowest for the year. Due to the low shipments arrivals of domestic and imported copper as well as increased downstream purchases, inventories in east China declined. Inventory in south China also fell sharply due to limited arriving shipments and the large price difference between Shanghai and Guangdong, driving cargoes to go to east China. In terms of consumption, if copper prices remain at the current position, it is expected that demand will still have room to rise. Copper prices will stay low in the near future.

5.Operating Rates Of Key Copper Rod Producers Using Copper Cathode Rose

The operating rates of key copper rod producers using copper cathode averaged 69.33% last week (August 11-17), an increase of 1.22 percentage points from last week. According to the latest SMM survey, orders surged last week due to the drop in copper prices, but the increase was relatively small.

According to feedback from copper rod enterprises, most of the dip buyers were large-scale cable companies last week, who refrained from taking the cargoes. The soaring spot premiums in Shanghai on Thursday sidelined cable factories. Orders at small and medium-scale cable factories were lacklustre. Downstream buyers still have a bearish attitude towards the prices, and are cautious in placing orders. According to SMM data, the price spread between copper rod produced with copper cathode and with copper scrap averaged 651 yuan/mt last week, stripping the price advantage of the latter. That boosted consumption of copper cathode rod.