According to SMM data, the operating rate of copper pipe & tube enterprises was 58.74% in February, down 14.13 percentage points MoM and down 11.54 percentage points YoY. February was affected by the Chinese New Year holiday. Leading enterprises maintained stable production and supply, with production showing strong resilience, basically sustaining “no holiday shutdowns” or only 0–3 days , and ensuring normal operations during the Chinese New Year period through shift rotations on production lines. Although orders saw slight fluctuations of 2%–10%, they remained overall under control. However, small and medium-sized enterprises performed poorly in February, dragging down the overall operating rate. Looking ahead to March, the operating rate of copper pipe & tube enterprises is expected to be 77.88%, up 19.14 percentage points MoM and down 7.35 percentage points YoY. The March production schedule of key air-conditioner enterprises fell 9.3% YoY from last year, in line with the YoY decline trend in copper pipe & tube operating rates. However, most copper pipe & tube enterprises said March production is expected to be better than expectations, and there are concerns over advance production and stockpiling. Worth noting is that R&D on high-performance alloy copper tubes by China’s leading enterprises will further reduce copper consumption in air conditioners, and most other enterprises are currently developing this type of technology as well. This has also increased orders for those domestic copper pipe & tube enterprises that already possess such technology, diluting the market share of other enterprises. In addition, the conflict in the Middle East reduced some home appliance export orders to the region, and the April production schedules of some domestic air-conditioner enterprises with relatively high market share exposure there are expected to decline.

In Q1, supported by the tight global supply of copper concentrates, the center of copper prices shifted significantly higher YoY, with the most-traded contract climbing to a historical high of RMB 83,320/mt.

[SMM Analysis:The Back structure is difficult to sustain ]

[SMM Analysis: Deep B's performance is not enough, while transition to C is not yet complete] SMM believes that the backwardation structure of SHFE will weaken in the future market. The premise of our following discussion is based on the existing tariff levels in the US.

In Q1 this year, supported by the tight global supply of copper concentrates, the center of copper prices shifted significantly higher compared to last year, with the most-traded contract climbing to a historical high of 83,320 yuan/mt. However, during the domestic Qingming Festival holiday, affected by the US's "reciprocal tariff" policy, copper prices plummeted, falling to a low of 71,320 yuan/mt, a drop of 12,000 yuan/mt from the year's peak, representing a decline of over 14%. Looking ahead, the center of copper prices is expected to move further downward. Supply side, with the expansion of the Kamoa and Oyu Tolgoi mines and the commissioning of the new Malmyz mine, global copper mine production is expected to grow by 2.3% in 2025. Meanwhile, the continuous expansion of China's capacity, along with the start-up of new capacities in Indonesia, India, and the DRC, will ultimately drive a 2.9% YoY increase in copper cathode production in 2025. Despite the simultaneous growth in copper mine and copper cathode capacities, the tight global supply of copper concentrates is expected to persist. Currently, copper concentrate treatment charges (TCs) have remained in negative territory for multiple months. As of May 23, spot TCs fell to -$44.25/dmt. In May, the cost of producing copper cathode from copper concentrates exceeded the domestic spot price by 4,705-5,455 yuan/mt. When considering the profit from sulphuric acid sales, the domestic sales loss for copper cathode narrowed to -3,266 to -2,516 yuan/mt. Long-term contract TCs remained at $23.25/dmt. After accounting for the profit from sulphuric acid sales, the domestic sales loss for copper cathode ranged from -2,751 to -700 yuan/mt. The fact that the production cost of copper cathode exceeds the domestic selling price, on one hand, supports copper prices from the cost side; on the other hand, it may dampen the production enthusiasm of smelters, constraining a significant increase in copper cathode production. Previously, influenced by changes in the market supply-demand pattern, the domestic import window for copper cathode closed, while the export window opened. Domestic smelters actively expanded export trade to secure profits. Data shows that in April, domestic copper cathode exports increased by approximately 10,000 mt MoM, while net imports decreased by 15,000 mt MoM. Coupled with the sufficient supply of copper concentrates and the increase in smelters' operating rates, copper cathode production increased by approximately 10,000 mt MoM in April. From the perspective of raw material reserves, domestic imports of copper concentrates, copper scrap, and copper anode increased MoM in April, laying the foundation for production in May. Entering May, with the continuous opening of the export window for copper cathode and the scale of production resumptions at copper cathode enterprises exceeding that of maintenance, domestic copper cathode production is expected to remain at a high level. Driven by the US's tariff reduction policy, the country's imports of copper products have increased significantly. Data shows that the US's imports of copper cathode in January, February, and March were 58,000 mt, 76,000 mt, and 123,000 mt, respectively. In April, imports exceeded 170,000 mt, hitting a record high. UBS analysts expect that approximately 250,000 to 300,000 mt of additional copper will flow into the US market between March and May, indicating that the US refined copper imports in H1 have nearly reached the full-year level of 2023. Against the backdrop of a surge in US copper product imports, China has emerged as the primary supplier, leveraging its cost and capacity advantages, driving up domestic demand for copper semis exports. In April, exports of unwrought copper and copper semis increased by nearly 10,000 mt month-on-month (MoM), while imports either decreased or slowed down in growth MoM, resulting in a 40,000 mt decline in net imports. Despite robust export demand, the characteristics of the off-season for domestic downstream copper enterprises began to emerge in the last week of May. SMM survey data shows that the weekly operating rates of copper cathode rod, secondary copper rod, wire and cable, and enamelled wire enterprises were 70.64%, 22.14%, 82.34%, and 83.90%, respectively, decreasing by 2.62 percentage points, increasing by 0.27 percentage points, decreasing by 1.05 percentage points, and decreasing by 0.50 percentage points MoM. Among them, copper consumption in the air conditioning and new energy sectors both decreased MoM. Specifically, the total production schedules for household air conditioners in China for May, June, and July were 23.3 million units, 20.978 million units, and 18.4206 million units, respectively, showing a month-on-month decline. In the NEV market, retail sales from May 1 to 26 reached 574,000 units, up 2% MoM from April, while nationwide passenger vehicle producers' new energy wholesale sales reached 620,000 units, down 3% MoM from April. The trend of global copper inventories continuing to shift towards the US is significant. As of May 29, SHFE and LME copper warrants decreased to 32,000 mt and 152,000 mt, respectively, with MoM declines of 6% and 25%. As of May 28, COMEX copper inventories increased to 179,700 mt, up 37% MoM. This data change reflects that copper inventories are shifting from the Asian and European markets to the US market. Looking ahead, although the early release of future demand for US imports has provided short-term support for copper prices, copper prices still face downward risks amid intensified volatility in the US and Japanese stock, bond, and currency markets, as well as the gradual entry of the domestic copper market into the off-season for purchases and sales. (Source: Futures Daily)

[SMM Analysis: Copper Prices Fluctuate Rangebound, Suppliers of Secondary Copper Raw Material Refuse to Budge on Prices When Selling] Copper prices fluctuated rangebound during the week, with a decline of 200 yuan/mt. The price of bare bright copper in Guangdong remained firm, with a decline of 0 yuan/mt. Due to the downward fluctuation of copper prices, suppliers of secondary copper raw material refused to budge on prices when selling. The price difference between copper cathode and copper scrap narrowed from 1,300 yuan/mt to 1,000 yuan/mt. The daily quotes from suppliers of secondary copper raw material were significantly higher than reasonable levels. However, given the insufficient orders on hand for secondary copper rod enterprises...

[SMM Weekly Operating Rate of Copper Wire and Cable Enterprises] This week (5.16-5.22), the operating rate of SMM copper wire and cable enterprises was 82.34%, down 1.05 percentage points MoM and up 6.47 percentage points YoY, 1.64 percentage points lower than the projected operating rate. As enterprises' orders on hand continued to deplete and the growth in new orders showed signs of weakness, the operating rate of enterprises weakened MoM this week. A major enterprise told SMM that as of now, although its copper consumption for production in May increased by approximately 6% YoY, the value of its new orders this month decreased by nearly 20% YoY. In addition to weakening demand, the growth in orders for aluminum wire and cable also squeezed the operating rate of copper wire and cable enterprises. Affected by these two factors, SMM projects that the operating rate of copper wire and cable enterprises will decline by 1.36 percentage points MoM to 80.98% next week (5.23-5.29), 5.05 percentage points higher than the same period last year.

[SMM Weekly Operating Rate of Copper Wire and Cable Enterprises] This week (5.16-5.22), the operating rate of SMM copper wire and cable enterprises was 82.34%, down 1.05 percentage points MoM and up 6.47 percentage points YoY, 1.64 percentage points lower than the projected operating rate. As enterprises' orders on hand continued to deplete and the growth in new orders showed signs of weakness, the operating rate of enterprises weakened MoM this week. A major enterprise told SMM that as of now, although its copper consumption for production in May increased by approximately 6% YoY, the value of its new orders this month decreased by nearly 20% YoY. In addition to weakening demand, the growth in orders for aluminum wire and cable also squeezed the operating rate of copper wire and cable enterprises. Under the influence of these two factors, SMM projects that the operating rate of copper wire and cable enterprises will decline by 1.36 percentage points MoM to 80.98% next week (5.23-5.29), 5.05 percentage points higher than the same period last year.

This week (5.16-5.22), the operating rate of SMM copper wire and cable enterprises was 82.34%, down 1.05 percentage points MoM and up 6.47 percentage points YoY, falling short of the expected operating rate by 1.64 percentage points. The operating rate of copper wire and cable enterprises failed to rise as expected this week, mainly due to the gradual weakening of growth in new orders and the gradual depletion of orders on hand, making it difficult for enterprises to achieve further production growth. From the perspective of end-use demand, the peak period for market demand release has temporarily passed, and the market has returned to calm. A major enterprise told SMM that as of now, although its copper consumption for production in May increased by approximately 6% YoY, the value of its new orders this month decreased by nearly 20% YoY, indicating weak growth in new orders. Consequently, the operating rate of copper wire and cable enterprises may decline in the future. By sector, only State Grid-related orders have shown relatively good performance, while orders for new energy power generation have decreased most significantly, with no optimistic performance observed in the civil and infrastructure sectors. In terms of inventory, raw material inventory was recorded at 17,700 mt this week, down 1.25% MoM, while finished product inventory was recorded at 19,140 mt, down 2.1% MoM. In addition to the weak growth in demand for copper wire and cable itself, the growth in orders for aluminum wire and cable has also squeezed the operating rate of copper wire and cable production. Under the influence of these two factors, SMM expects that the operating rate of copper wire and cable enterprises will decline by 1.36 percentage points MoM to 80.98% next week (5.23-5.29), which is still 5.05 percentage points higher than the same period last year.

This week (5.9-5.15), the operating rate of SMM copper wire and cable enterprises was 83.39%, down 0.1 percentage point WoW and up 3.57 percentage points YoY, which was 2.86 percentage points lower than the expected operating rate. According to SMM, the current production of enterprises mainly relies on previous orders on hand, and the copper consumption in production has not been significantly affected. However, the significant fluctuations in copper prices this week have had a clear inhibitory effect on the new orders of enterprises. Multiple enterprises have indicated that the increase in new orders this week has decreased WoW, with low market purchase willingness and extreme caution towards the fluctuating copper prices. Currently, enterprises are concerned that the growth of new orders will drag down the operating rate in June. From the inventory perspective, the raw material inventory of SMM copper wire and cable enterprises this week was recorded at 17,930 mt, down 2.18% WoW, indicating low purchase willingness of enterprises amid high copper prices. In contrast, the finished product inventory increased by 4.6% MoM to 19,550 mt, suggesting a slowdown in the cargo pick-up speed of downstream enterprises. Given the high uncertainty in current copper prices and the less-than-ideal growth in market demand, copper wire and cable enterprises do not expect an improvement in the next week. SMM forecasts that the operating rate of copper wire and cable enterprises will only increase by 0.59 percentage point WoW to 83.98% next week (5.16-5.22), and will increase by 8.11 percentage points YoY.