Operating Rate of Wire and Cable Enterprises Exceeded Expectations in November! Has End-Use Demand Rebounded? [SMM Analysis]

According to the SMM survey, the operating rate of SMM wire and cable sample enterprises in November was 80.68% (64 surveyed enterprises, sample capacity of 3.643 million mt), up 3.7 percentage points MoM, and 5.16 percentage points higher than the expected operating rate, but still 11 percentage points lower YoY. Among them, the operating rate of large enterprises was 86.41%, medium-sized enterprises 61.11%, and small enterprises 46.6%.

Overall, the orders of wire and cable enterprises in November rebounded beyond expectations. SMM summarized the reasons as follows:

1. In November, due to the impact of overseas macro sentiment, copper prices fell sharply. Some end-use customers seized the opportunity to restock at low prices, releasing previously accumulated demand and boosting orders for wire and cable enterprises.

2. In November, as the weather turned colder nationwide and year-end approaches, the end-use industry rushed to meet deadlines before the year-end, promoting market demand. By industry, the State Grid and South Grid remained the main order support for most wire and cable enterprises. SMM heard that both increased their order volume and frequency in November. Orders from PV and wind power also grew significantly, and previously awarded high-voltage orders were concentrated in November. However, orders from civil real estate remained weak, with only some government-led infrastructure projects showing some recovery compared to before, but the total volume still could not compare with the same period last year. Due to the impact of real estate and infrastructure demand, the communication wire and cable market also performed poorly. Overall, the power construction market was relatively optimistic, while demand from building construction was hard to see growth.

The raw material inventory of copper wire and cable sample enterprises in November recorded 47,442 mt, with a raw material inventory/output ratio of 19.37%, down 0.44 percentage points MoM. Finished product inventories recorded 50,760 mt, with a finished product inventory/output ratio of 20.72%, down 1.88 percentage points MoM, indicating that the current downstream has accelerated picking up goods.

SMM expects the operating rate of China's copper wire and cable enterprises in December to be 78.94%, down 1.74 percentage points MoM and 4.72 percentage points YoY. According to the survey, as the weather becomes colder in December, the demand in the northern market will be further affected, and the total market demand will decrease compared to November. At the same time, as year-end approaches, some wire and cable customers will close their accounts at the end of December, focusing on payment collection issues, which will slightly slow down production efficiency in the short term. Additionally, according to SMM, due to the increased demand for aluminum wire and cable products within the industry, some sample enterprises have recently shifted their focus to aluminum orders, resulting in a significant decline in copper wire and cable production compared to before. These factors will all drag down the operating rate of the SMM copper wire and cable industry in December. However, overall, the southern market is relatively less affected by the weather, and end-use sectors will push for annual targets in December. Additionally, some wire and cable enterprises have indicated that they will push for performance in December, possibly introducing discount promotions to obtain new orders, which will support the operating rate of wire and cable enterprises in December, resulting in only a slight decline in the operating rate.