China's bare bright copper price increased to Yuan 64,260/tonne on September 15, which was at a three-year relatively high level under Mysteel's assessment. Meanwhile, although the narrowing of the refined/scrap copper price spread once again squeezed the profits of secondary copper processing enterprises, the advantage is still there, enabling more secondary copper enterprises to actively purchase before the National Day holiday.
In addition, the supply of copper scrap has not significantly improved due to the reduction in imports based on the General Administration of Customs of the People's Republic of China (GACC) data. However, some market participants still have expectations for the consumption peak season in September, so, the inventory keeps reducing. According to historical patterns, the improvement of consumption during peak seasons will be more likely to stimulate further increases in copper scrap prices.
Therefore, copper scrap prices in China are expected to perform strongly in the short term.
Data Source: Mysteel
The price spread of refined/scrap copper was Yuan 1,561/tonne as of September 15, slightly higher than the reasonable price spread of Yuan 1,398/tonne. The substitute advantage of scrap copper has improved with the expansion of the price spread in the past month, increasing the operating rate of secondary processing enterprises. Consumption has also slightly improved, but not obvious.
Data Source: Mysteel
Because of the high temperature and rainy weather in July-August, the dismantling progress of waste copper products in China was slow, and the low operating rate of processing enterprises reduced the outflow of tailings, leading to a shortage of copper scrap in the market. This situation was alleviated in September, but it is still difficult for secondary copper semis processing enterprises to purchase sufficient and affordable secondary copper spots. Therefore, it is expected that domestic copper scrap and secondary copper prices will remain strong in the short term.
Data Source: Mysteel
China's copper scrap imports are still in a loss state, which makes traders less proactive in purchasing overseas copper scrap. In addition, the import of brass scrap has been significantly restricted by high overseas prices and weak domestic consumption.
Data Source: GACC
According to Mysteel's survey, the capacity utilization rate of secondary copper rod processing enterprises in China has slowly recovered recently, which is boosting demand for copper scrap. Some processing enterprises still have expectations for the peak season and have planned to increase production.
Data Source: Mysteel
The capacity utilization rate of Chinese copper bar processing enterprises continues to decline, mainly due to weak consumption of downstream bathroom products. On the other hand, the output of small and medium-sized processing enterprises mainly producing extruded copper bars increases slightly with demand. Processing enterprises with continuous casting copper bars as their main products are facing more severe price competition. However, with the arrival of the traditional consumption peak season, domestic copper bar processing enterprises have appropriately increased their raw material reserves.
Data Source: Mysteel
Written by Edenlis Huang, huangting@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com