China's refined copper rod output decreased by 274,900 tonnes or 12.6% quater on quarter but increased by 91,800 tonnes or 5% year on year to 1.9137 million tonnes in the first quarter of 2023, according to Mysteel's survey of 61 refined copper rod producers in China with a total monthly production capacity of 14.145 million tonnes.
Data Source: Mysteel
Although some processing enterprises with limited production due to maintenance in February-March, downstream high purchasing enthusiasm after the Spring Festival still motivated them to maintain high production. In addition, due to the low base caused by the epidemic in the previous two years, there was a significant year-on-year increase in refined rod output in the first quarter.
Data Source: Mysteel
However, China's secondary copper rod output increased by 172,900 tonnes or 41.2% quarter on quarter and 157,000 tonnes or 36.1% year on year to 5.921 million tonnes in the first quarter of 2023, according to Mysteel's survey of 56 secondary copper rod producers with a total monthly production capacity of 6.29 million tonnes.
Data Source: Mysteel
The significant increase in secondary copper rod output was as expected mainly due to the newly added of 20 survey enterprises with a monthly production capacity of about 200,000 tonnes. If compared to the original samples, the overall production only maintains a normal level. Although speculative trading by traders was more active in the first quarter due to the price inversion between secondary copper rods and futures copper, it did not boost actual consumer demand. In addition, due to the shortage and high prices of raw materials, the cost pressure on processing enterprises had become prominent, so some processing enterprises turned to produce copper anode.
Data Source: Mysteel
The capacity utilization rate of secondary copper rod processing enterprises in China has remained low since the second half of 2022, mainly due to the impact of the epidemic before the Spring Festival and the shortage of raw materials after the Spring Festival. According to Mysteel's survey, although there is expected to be an increase in production in the second quarter, it is mainly for the delivery of speculative orders signed previously and does not mean an improvement in actual demand.
Data Source: Mysteel
The processing fees for refined copper rods in China fluctuated in the range of Yuan 400-700/tonne in the first quarter of 2023. The prices in Central and Eastern China were relatively stable, with a fluctuation range of only Yuan 100/tonne. However, the price fluctuations in North and South China were even more severe, reaching Yuan 150-350/tonne. Due to weaker market demand in South China, its processing fees were also lower. Due to the lack of cross-regional trading conditions for refined copper rods, the backlog of finished products in local markets will lead to a significant decrease in local processing fees.
Data Source: Mysteel
China's refined/scrap copper rod price spread remained Yuan 1,000/tonne above the reasonable price difference in the first quarter, which boosted trading enthusiasm. Although the price spread has recently narrowed, it still makes speculators profitable.
Data Source: Mysteel
China's refined copper rod output is expected to increase in April, according to Mysteel's recent survey of sample enterprises. Although some enterprises are still undergoing maintenance from April to May, the impact on overall production is relatively small. In addition, some large processing enterprises have plans to increase production. Due to the expected increase in consumer demand in the short term, it will continue to stimulate the overall output of refined copper rods.
According to Mysteel's survey, the capacity utilization rate of secondary copper rod processing enterprises in China is expected to continue to increase in the short term. However, the shortage and high prices of raw materials will still affect the stability of production. Therefore, the overall production growth of secondary copper rods in the second quarter will be very limited.
Written by Edenlis Huang, huangting@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com