End-use Demand Recovery Lacks Strength; Brass Billet Operating Rates Continue to Pull Back [SMM Analysis]

The brass billet industry remains in the traditional consumption off-season, with end-use demand recovery still insufficient. Weather disruptions added to the pressure and further weighed on production. According to the latest SMM data, the operating rate of China's brass billet industry came in at 48.55% last week (Aug 21-Aug 27), down 0.19 percentage point WoW and 0.96 percentage point YoY.

On the raw material side, secondary brass supply remained persistently tight. The growth in domestic scrap brass circulation and import supply was limited, and raw material prices stayed high, continuing to squeeze processing margins at brass billet producers. Even as copper prices saw periodic pullbacks, producers' willingness to restock remained weak, and most maintained a purchase-as-needed approach. Last week, days of raw material inventories at sampled producers were 3.56 days, down 0.05 day WoW. Raw material inventories remained at low levels, and the raw material shortage continued to constrain capacity release at some small and medium-sized plants.

On the demand side, off-season effects continued. Downstream end-use industries such as home appliances, sanitary ware, and hardware showed limited willingness to restock, and the market was dominated by rigid demand orders, with overall new orders remaining limited. Although periodic copper price pullbacks provided some trading opportunities, they did not lead to large-scale downstream purchases. Producers' shipment pace remained slow, and finished product inventory destocking was hampered. This week, days of finished product inventories at sampled producers were 5.04 days, up 0.08 day WoW, with inventories shifting from earlier destocking to slight accumulation. Producers still faced capital occupation pressure. In addition, last week some small producers suspended production temporarily due to typhoon weather, further dragging down the industry's overall operating rate.

Looking ahead to this week (Aug 28-Sep 3), the industry's off-season pattern has not yet reversed, and end-use demand is unlikely to show significant improvement. Downstream buyers will remain cautious and wait and see amid consolidating copper prices. The situation of tight recycled brass raw material supply and high costs will persist in the near term; production resumptions at small plants after the typhoon will provide limited capacity boost. SMM expects the brass billet operating rate to edge down to 48.42% this week, down 0.58 percentage point YoY. Industry-wide production schedules will remain low, and producers' operating pressure is unlikely to ease significantly in the near term.