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Operating rates at scrap-using copper rod producers sharply fall in Apr

Metal News - Published on Fri, 17 May 2019

Image Source: Recycling Today
SMM reported that Chinese manufacturers that produce copper rods with copper scrap as feedstock operated at a sharply lower level last month as orders shrank after copper scrap lost its price advantage on firm invoice costs and weak copper prices. An SMM survey showed that operating rates across scrap-using copper rod producers in China averaged 66.98% in April, down 4.27 percentage points from March and 7.12 percentage points from April 2018.

A limited decline in the rate at which copper scrap consumers in China purchase value-added tax invoices for tax-excluded copper scrap after the VAT cut took effect from April 1, as well as weak copper prices narrowed the price discount of copper scrap against copper cathode from a peak of 1,500 yuan/mt to 1,200 yuan/mt.

The copper scrap spread was at around 1,000 yuan/mt for much of April, down CNY 400 per tonne from the previous month, lowering the appeal of copper scrap and reduced orders for scrap-using copper rods.

Copper scrap supplies also substantially declined as traders held back from offloading cargoes in a sluggish market.

The appeal of copper scrap further weakened in May, with the discount against copper cathode falling to CNY 600 per tonne as of May 17, as a flare-up in US-China trade tensions dragged down copper prices by some 1,000 yuan/mt.

This further kept copper scrap traders from selling. Tighter supplies kept prices high, and drove up costs across copper rod producers. Losses have driven most producers to cut production, even as a tiny few are maintaining normal production to avoid losing clients.

The average operating rate across scrap-using copper rod producers is expected to fall 5.36 percentage points month on month to 61.63% in May, standing 10.28 percentage points lower than the same period last year.

The rate across firms that produce copper rod with copper cathode as feedstock, however, is likely to significantly rebound in May, posting the first year-on-year increase in 2019, of close to 2 percentage points.

The Chinese government’s tighter grips over waste imports will sustain tightness in copper scrap supply. This, together with limited steam in copper prices, is set to prevent copper scrap spreads from widening. Consumption of copper cathode will receive a further boost from the weaker appeal of copper scrap.

Source :

Posted By : Rabi Wangkhem on Fri, 17 May 2019
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