China Copper Scrap Market Sees Sharp Adjustments Amid Falling Prices
The copper scrap market underwent sharp adjustments in China as prices fell from last week's high above 112,000 yuan/mt to 108,370 yuan/mt by the weekend. The most-traded SHFE copper contract slid from 108,240 yuan/mt at the start of the week to an intraweek low of 107,320 yuan/mt.
However, after the US Fed rate hike and market sentiment were digested, copper prices stopped falling and stabilized, rebounding to 108,370 yuan/mt. Suppliers, who had sold persistently during last week's price surge, held limited available material and generally held prices firm, with weak willingness to sell.
Material purchased was mostly used to fulfill prior orders rather than add new supply to the market, limiting the decline in raw material prices and even driving a countertrend rebound. The price difference between primary metal and scrap narrowed from 2,481 yuan/mt to 2,125 yuan/mt before rebounding to 2,621 yuan/mt.
Despite copper prices pulling back, purchase willingness among secondary copper rod enterprises recovered notably as they sought to restock at lower raw material costs. The operating rate of secondary copper rod enterprises was 10.27% this week, up 1.53 percentage points WoW but down 13.06 percentage points YoY.
The average premium of secondary copper rod prices in Jiangxi against futures reached 153 yuan/mt, and the economic substitution advantage of secondary copper rod was essentially lost. As a result, the average weekly gross profit calculated by SMM's secondary copper rod sales gross profit model was only 493 yuan/mt, severely squeezing corporate profitability.