High Raw Material Prices Squeeze Profits, Operating Rate of Brass Billet Producers Continues to Decline [SMM Brass Billet Weekly Market Review]

       This week (Aug. 7-Aug. 13), the weekly operating rate of SMM-surveyed brass billet producers was 48.52%, down 0.16 percentage points WoW and down 1.25 percentage points YoY, continuing the downtrend. The tight supply of recycled brass raw materials has not eased, and raw material prices remained elevated along with copper prices. Raw material inventory days at surveyed producers were 3.49 days, still low, and producers remained cautious about raw material stockpiling. The traditional downstream off-season continued, with end-use industry orders showing no notable improvement; buying was limited to small-scale restocking as needed. Finished brass billet destocking was slow, and finished product inventory days at surveyed producers were 5.14 days this week, a slight increase WoW. As copper prices kept rising, raw material costs for brass billet processing enterprises increased, but the pass-through to product prices lagged, so enterprise profits were continuously squeezed and most producers' production enthusiasm was dampened. By product category, orders for continuous-cast billet remained weak, while extruded billet orders were relatively moderate but insufficient to support overall operating rates; the pattern of passive contraction in brass billet production remained unchanged.

       Looking ahead to next week (Aug. 14-Aug. 20), the off-season market is unlikely to reverse quickly, and a recovery in substantive downstream orders still lacks a driver. Meanwhile, copper prices will fluctuate at highs, the tight supply of recycled brass raw materials will persist, and high raw material costs will continue to squeeze enterprise profits and dampen production willingness.SMM expects the operating rate of surveyed brass billet producers to continue to edge down to 48.46% next week, down 1.37 percentage points YoY.