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January 19:
In 2024, copper prices experienced significant fluctuations, and the prices of secondary copper raw materials also showed a trend of rising first, then pulling back, followed by a slight rebound. In Q1, copper prices continued the stable trend of 2023. In Q2, due to tight overseas copper ore supply, sanctions on Russian copper and aluminum, and macro events such as US dollar copper boundary warehouses, copper prices surged to a historical high of 88,940 yuan/mt. However, as speculative sentiment faded, copper prices fell sharply in Q3. Starting in August, driven by market expectations of a US Fed interest rate cut, copper prices bottomed out. In Q4, on the eve of Trump's presidential election victory, copper prices showed wide fluctuations.
Since March 2024, domestic secondary copper raw material suppliers actively increased shipments due to rising copper prices to avoid risks from a pullback from highs. When copper prices climbed from 68,000 yuan/mt to 73,000 yuan/mt, the market had ample secondary copper raw material inventory, and even copper powder began to be favored by enterprises. Secondary copper rod enterprises increased inventory reserves to guard against further price increases. Although copper prices briefly pulled back and then climbed to a historical high of 88,940 yuan/mt, by mid-March, a large amount of secondary copper raw material inventory had been consumed. The high copper prices did not significantly boost trading volume, and the supply-demand relationship remained tight. Subsequently, copper prices fell sharply, and suppliers became more cautious, delaying shipments. Even though copper prices rebounded in H2, suppliers maintained a wait-and-see sentiment, and the annual supply of secondary copper raw materials remained tight.
In 2024, the supply of secondary copper raw materials showed a trend of tightness at the beginning of the year, followed by easing. Early in the year, the rapid capacity expansion of domestic smelters in China led to a mismatch in copper ore supply, reversing the previous surplus situation. Concerns arose that domestic smelters might significantly reduce copper cathode production due to a lack of copper ore. Additionally, the closure of large overseas copper mines, bans on Russian copper deliveries in Europe and the US, and short squeezes by large traders drove copper prices significantly higher in H1. As copper prices rose, secondary copper raw material suppliers at home and abroad sold off large inventories, leading to a record high secondary copper raw material import volume of 180,900 mt (metal content) in April 2024. Subsequently, copper prices pulled back from highs, and the price difference between primary metal and scrap narrowed from 5,400 yuan/mt to 1,300 yuan/mt. Meanwhile, the Chinese government introduced "reverse invoicing" and the Fair Competition Review Regulations, significantly impacting the operating rates of scrap utilisation enterprises. Under the dual pressure of falling copper prices and weak demand, secondary copper raw material suppliers generally chose to hold back sales, leading to tighter supply in H2 and reduced circulation of low-priced secondary copper raw materials in the market. According to SMM estimates, the total supply of secondary copper raw materials in 2024 will reach 3.876 million mt (metal content), an increase of 327,000 mt compared to 3.549 million mt in 2023.
Since 2024, due to overseas demand for copper cathode exceeding supply, copper prices have shown a trend of "LME outperforms SHFE." Meanwhile, the US Fed's high-interest rate policy has kept the yuan under long-term pressure against the US dollar, resulting in a severe "inversion" in overseas secondary copper raw material prices. Despite this, domestic smelters showed stronger demand for secondary copper raw materials than in previous years. When prices were favorable, secondary copper raw material traders still opted to import. According to SMM estimates, the physical content of secondary copper raw material imports in 2024 is expected to reach 2.247 million mt, equivalent to 1.797 million mt in metal content, an increase of approximately 260,000 mt in physical content and 208,000 mt in metal content compared to the previous year.
In contrast, although the real estate sector performed poorly throughout the year despite multiple stimulus policies, the import volume of secondary brass ingots continued to decline. However, due to insufficient mineral resources for smelters, they had to import copper ingots from overseas, with the growth in imports exceeding the decline caused by secondary brass. According to SMM estimates, the metal content of imported secondary copper ingots in 2024 is expected to reach 482,200 mt, an increase of 92,900 mt compared to the same period last year.
Although the continuous depreciation of the yuan caused secondary copper raw material imports to remain unprofitable, the import window briefly opened from October to December, and import volumes still increased. This was mainly because the issue of tight copper concentrate supply remained unresolved, forcing smelters to rely on externally sourced anode plates to ensure copper cathode production. As a result, demand for secondary copper raw materials increased, and import traders were willing to increase imports only when they could secure certain profits through operations in domestic and overseas futures markets.
In 2024, tight copper ore supply significantly increased smelters' demand for anode plates. To ensure copper cathode production, smelters offered procurement prices for anode plates higher than the selling prices of secondary copper rods in the market. This prompted secondary copper rod plants to switch to producing anode plates. However, in H2, due to the implementation of new policies, many secondary copper rod plants suspended production to observe the situation, waiting for policy clarity before resuming operations. During this period, the secondary copper rod plants that continued production mainly focused on anode plates as their primary product, fulfilling long-term contracts with smelters. Consequently, the proportion of secondary copper raw materials flowing to the smelting sector increased significantly compared to previous years. According to SMM estimates, the proportion of secondary copper raw materials flowing to the smelting sector in 2024 is expected to reach 47.5%, while the proportion flowing to the processing sector will be 52.5% (compared to 43% and 57% in 2023, respectively).
In the processing sector, secondary copper rods remain the primary destination, followed by copper billets and copper foil. In April and July this year, new policies strengthened tax regulation on the circulation of secondary copper raw materials and standardized local government tax incentives and subsidies for secondary copper enterprises. These policies reduced the economic benefits of secondary copper raw materials due to tightened tax policies, compressing the profits of processing enterprises. Additionally, the new policies stipulated that newly added secondary copper rod capacity nationwide would no longer enjoy local preferential policies. As the economic benefits of scrap utilisation enterprises continued to decline, secondary copper rod plants may face capacity exit and consolidation in the future.
In the smelting sector, the high copper prices in Q2 gradually eased the supply of secondary copper raw materials. Against the backdrop of increased demand for anode plates from smelters, their profitability exceeded that of secondary copper rods, significantly driving secondary copper raw materials to flow into the smelting sector. According to SMM estimates, the volume of secondary copper raw materials flowing into the smelting sector in 2024 is expected to reach 1.84 million mt, an increase of approximately 330,000 mt compared to the previous year. Although secondary copper raw material supply tightened in H2 and new policies impacted the operating rates of secondary copper rod plants, the switch to anode plate production compensated for the raw material shortage caused by insufficient copper ore, ensuring copper cathode production.
In the future, the flow of secondary copper raw materials may undergo significant changes, with the ratio between the processing and smelting sectors potentially shifting from the current 6:4 to 4:6.
Looking ahead, the global secondary copper market is undergoing significant changes. Overseas, local secondary copper smelters in Europe and the US are gradually coming online, leading to more secondary copper raw materials being consumed in local markets. Additionally, accelerated urbanization in regions like India and Dubai is driving increased copper demand. Meanwhile, customs policies overseas are relatively more lenient compared to China. After Trump takes office in 2025, he may impose a 10% tariff on Chinese imports, while China imposed a 25% tariff on US secondary copper raw materials in 2018. Against this backdrop, many Chinese import traders have suspended secondary copper raw material purchases from the US since mid-to-late November, indicating that China's secondary copper imports may undergo adjustments due to superior policies in other countries and uncertainties in China-US trade relations.
Domestically, in 2024, China will implement trade-in subsidy policies for home appliances and NEVs, driving the scrapping of vehicles and appliances beyond 2023 levels. Over the next 15-20 years, recyclable secondary copper raw materials are expected to grow significantly. Additionally, the establishment of the China Resource Recycling Group in September 2024 provides strong support for promoting the recycling of secondary resources. With support from national policies, the group is expected to expand the coverage of domestic secondary resource recycling, promoting a full-chain "internal circulation" economy from initial recycling to end-use enterprises, accelerating the process of making domestic secondary copper raw materials a major supply source. Furthermore, in December, the State Council issued a notice to set up pilot programs for scrapped home appliance recycling in various cities, which will increase the recycling volume of old home appliances to some extent, thereby boosting domestic secondary copper raw material supply.
From 2024 to 2030, China's domestic secondary copper raw material supply is expected to increase from 2 million mt to 3.34 million mt. This will provide more raw material security for the domestic copper industry and enhance market competitiveness.
January 17:
In terms of macroeconomics, the US December CPI YoY growth rate rebounded mildly to 2.9%, while core CPI YoY growth rate unexpectedly pulled back to 3.2%. The US dollar index rose to 110 points at the beginning of the week before gradually pulling back to around 109 points. Long-term US Treasury yields dropped significantly, providing short-term upward momentum for copper prices. The US Beige Book indicated strong employment and encouraging progress on inflation. Data released on Wednesday showed that a key measure of underlying inflation slowed for the first time in six months. LME copper rose from around $9,100/mt to approximately $9,250/mt during the week. In China, data released by the National Bureau of Statistics (NBS) showed that domestic GDP grew by 5.0% YoY in 2024, with Q4 consumption showing signs of recovery and the effects of stimulus policies becoming evident. Fundamentals showed a steady improvement. SHFE copper rose from 75,000 yuan/mt to 76,000 yuan/mt during the week.
In terms of foreign trade, the import arbitrage window closed this week as previous exchange rate fluctuations were gradually smoothed out. However, the price spread between the Comex most-traded contract and the LME 0-3M contract remained high. Since this price spread was not caused by inventory factors, there were no significant cargo movements on the Asia-North America route. With the Chinese New Year approaching, few transactions were reported for late January arrivals, with most inquiries focusing on early February arrivals. Due to the widening SHFE/LME price ratio, buyers and sellers faced significant disagreements. LME Asian warehouses continued to see large-scale warehouse warrant cancellations this week, but the contango structure of the 0-3M contract showed no significant fluctuations. Some previously canceled cargoes have already entered the country. With bonded zone inventory remaining at low levels, some downstream players also sourced from LME warehouses at lower prices to prepare for domestic inventory needs. Regarding EQ, scattered offers were reported for mid-to-early February arrivals, but actual transactions were significantly impacted by the deteriorating SHFE/LME price ratio. Additionally, SMM learned that some major players have shipped cargoes to North America, with an estimated in-transit volume of 20,000 mt.
In the domestic market, since January, the high spot premiums in domestic trade have eased. After the delivery of the SHFE copper 2401 contract, spot premiums pulled back slightly, and rising copper prices dampened some downstream pre-holiday restocking sentiment. Overall, domestic consumption slowed as logistics halted and enterprise orders weakened.
Looking ahead to next week, the overseas macro environment is expected to remain quiet, with the market anticipating follow-up tariff policies after Trump takes office. Meanwhile, the Bank of Japan will announce its interest rate decision next week, and the US dollar index faces some resistance above. LME copper is expected to fluctuate within the range of $9,200-9,350/mt, while SHFE copper is expected to move between 75,500-76,500 yuan/mt. In the spot market, as the countdown to the Chinese New Year holiday begins, the spot market is expected to gradually quiet down. Spot prices against the SHFE copper 2501 contract are expected to remain at premiums of 50-120 yuan/mt.
January 21:
Today, spot #1 copper cathode in Guangdong was quoted at a discount of 180-50 yuan/mt against the front-month contract, with an average discount of 115 yuan/mt, unchanged from the previous trading day. Hydro copper was quoted at a discount of 330-230 yuan/mt, with an average discount of 280 yuan/mt, up 20 yuan/mt from the previous trading day. The average price of #1 copper cathode in Guangdong was 75,435 yuan/mt, up 70 yuan/mt from the previous trading day, while the average price of hydro copper was 75,270 yuan/mt, up 90 yuan/mt from the previous trading day.
Spot market: Guangdong inventory has risen for seven consecutive days, mainly due to increased arrivals and decreased outflows from warehouses. Today's market quotations were relatively chaotic. Brands with delivery qualifications maintained firm quotes at a discount of 150 yuan/mt, while brands without delivery qualifications were quoted at a discount of 220 yuan/mt. Downstream factories preferred lower-priced copper, but traders were more willing to purchase brands eligible for delivery. As of 11:00 am, high-quality copper was quoted at a discount of 50 yuan/mt against the front-month contract, standard-quality copper at a discount of 200 yuan/mt, and hydro copper at a discount of 350 yuan/mt. Notably, due to the large discounts, suppliers preferred delivery over selling at low prices, with warehouse warrants increasing by 1,503 mt yesterday. It is expected that the price spread between the two brands will further widen in the future.
Overall, different treatments for different sources of supply have led to greater divergence in spot quotations.
January 21 News: Overnight, LME copper opened at $9,178/mt, initially dipped to $9,149/mt, then surged to a high of $9,297/mt during the session, and fluctuated rangebound at the close, finally settling at $9,266/mt, up 0.92%. Trading volume reached 22,000 lots, and open interest rose to 291,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 75,350 yuan/mt, initially dipped to 75,200 yuan/mt, then climbed steadily to an intraday high of 75,870 yuan/mt, and dropped back slightly at the close, finally settling at 75,740 yuan/mt, up 0.09%. Trading volume reached 31,000 lots, and open interest rose to 158,000 lots. Macro side, Trump officially took the oath of office as US President, delivering the longest inaugural address since 1929, mentioning topics such as tariffs, energy, and green policies, but omitting cryptocurrency. US media reported that Trump is expected to release a trade policy memorandum on Monday but will not impose new tariffs on his first day in office. Affected by the news, market concerns over the US-China trade war eased, the US dollar index plunged, and LME copper hit a new high. Fundamentally, domestic copper cathode arrivals were limited, while imported copper cathode increased slightly. However, as downstream end-user enterprises gradually went on holiday and largely completed stockpiling, market transactions were moderate. As of Monday, January 20, copper inventories in major regions nationwide increased by 1,700 mt from last Thursday to 109,800 mt, up 29,000 mt compared to the same period last year. Among them, Shanghai inventories were 14,800 mt higher YoY, Guangdong inventories were 3,900 mt higher YoY, and Jiangsu inventories were 9,500 mt higher YoY. Under weak consumption, weekly inventories are expected to continue increasing. Price side, copper prices are expected to find some support at the bottom today.
January 20:
According to data from the General Administration of Customs, China imported a total of 3.7388 million mt of copper cathode in 2024, up 6.49% YoY. Among this, December imports reached 370,400 mt, up 2.93% MoM and 18.88% YoY. In 2024, China exported a total of 457,500 mt of copper cathode, up 63.86% YoY. Among this, December exports reached 16,700 mt, up 44.06% MoM and 55.61% YoY.
From the import side, December copper cathode imports totaled 370,400 mt, up 2.93% MoM and 6.49% YoY. Among this, imports from the DRC reached 163,100 mt, up 30.21% MoM, accounting for 44.05% of total imports. In mid-to-late December, the SHFE/LME price ratio opened significantly, leading to improved transactions in the US dollar copper market and a large volume of port arrivals being imported. Additionally, the cancellation of the copper semis export tax rebate policy, which was implemented in December, increased downstream processing enterprises' demand for imported copper.
From the export side, October copper cathode exports totaled 16,700 mt, rebounding from November on a MoM basis. The main growth came from Vietnam and Taiwan, China. Since the export window remained closed, domestic smelters showed limited proactive export activity.
Looking ahead, SMM expects copper cathode imports in January 2025 to decline MoM from December 2024. On one hand, December-January is the peak negotiation period for US dollar copper long-term contracts, and shipments are expected to be executed starting February 2025 after contracts are finalized. Shipment volumes in January-February are relatively low. On the other hand, with the Chinese New Year holiday approaching in January, port arrivals before and after the holiday are expected to decrease due to logistics arrangements. Overall, copper cathode imports in January 2025 are likely to decline MoM from December 2024. On the export side, the export profit window in January remains closed, and domestic smelters are expected to show limited proactive export activity. Copper cathode export volumes in January are expected to remain basically flat.