Operating rates of copper rods are expected to decline in September with high inventories

SHANGHAI, Sep 7 (SMM) — Operating rates at copper rod makers stood at 72.66% in August, a decrease of 3.50 percentage points month on month and 2.79 percentage points year on year, according to SMM survey. Operating rate at large copper rod makers came in at 72.77%, that of medium-sized copper rod makers was 79.50%, and that of small copper rod makers was 38.86%. After the operating rate hit the highest record in April, operating rates at copper rod makers declined for the fourth consecutive month in August, and the decline continued to expand, with negative growth year on year. (Research enterprises: 43, production capacity: 10.17 million mt)

Operating rate of copper rods in August reached the biggest month-on-month decline since March this year amid the low season. Operating rates at downstream cable makes dropped sharply. The impact of the decline of new orders in the downstream has been more concentrated on operating rates in August since July. The orders of copper rod enterprises mainly engaged in enameled wire in the downstream were relatively stable, and the decline of copper rod operating rates was more affected by the decrease of power cable orders.

Downstream shipment slowed down beyond expectations, leading to a further increase in finished product inventories at copper rod makers in August. The finished product inventory ratio at copper rod makers further increased sharply from 12.91% to 17.51% in August. Many copper rod makers temporarily stopped production or reduced production capacity from August to September. The newly added capacities of copper rods has also been released intensively in the near term. The competitive sales of copper rod were intensified amid weak consumption with fierce low-price competition and the falling processing fee. The processing fee of 8mm power rods in east China was quoted at 500-650 yuan/mt, and the average price moved down slightly again as of the week of September 4.

The raw material inventory ratio of copper rod makers stood at 7.82% in August,, an increase of 0.18 percentage points from the previous month. Copper prices fluctuated at a high level with sluggish orders, and raw material inventories of copper rod mills remained at a low level.

Operating rates at copper rod makers are expected to be 71.64% in September, which is 1.02 percentage points lower than the previous month and 5.16 percentage points lower than the previous year, according to SMM survey. The orders of copper rod makers have not improved yet, leading to generally pessimistic sentiment about the peak season in September. In addition, the inventory pressure of finished products in copper rod makers increased in August. The enterprises still had plans to stop production and turn to maintenance in September and the operating rate is expected to move down slightly in September. The copper market is not prosperous in peak season.