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1) Operating Rates
According to SMM's survey, monthly copper consumption at the 19 producers was 35.25 kt during November, with overall operating rates 47.2%, down 16.7% YoY, and down 3.3% MoM, the lowest operating rates this year. Operating rates at enterprises with capacity of 50-100 kt/yr fell, down 11.4% MoM. The sluggish air-conditioning industry was responsible for lower demand for copper tubes, and many copper tube producers cut production in order to avoid market risk under current economic conditions.
2) Slight Decline in Raw Material Inventories
The survey shows inventories of raw materials held by copper tube producers only accounted for 13.1% of monthly copper consumption, dropping slightly from the previous month's level of 13.5%, down 2.3% YoY. Domestic copper prices have fallen since October, and high inventories means higher risk, so smelters were cautious about raw material purchases, keeping inventories at the lowest level necessary for production demand. As enterprises are under pressure to secure credit before the New Year holiday, they are reducing inventories to help obtain favorable financing rates.
3) November Tube Exports Increase MoM
According to SMM's survey, exports of copper tubes at the 19 smelters were 9.25 kt during November, accounting for 26.1% of total output, up 4.9% from October's 21.2%. The main reason for the increase in exports was the sharp decline in domestic orders. Although export rebate adjustments increased export profits, exporters said new rebate adjustments would not stimulate large increases in export orders due to weak overseas demand.
4) Falling Demand for Copper Tube From Air Conditioner Industry
Data from China's Home Appliances Association showed nation-wide air-conditioning inventories in October exceeded 14 million units, with brands Gree and Midea accounting for as much as 60%.
The Energy Efficiency Standardized Management Center of Chinese Standards Academy said at present, new energy efficiency standards for air-conditioning has not yet been determined, but will definitely come out next March, though the effective date is still unknown. The new logo for energy efficiency for air-conditioners will also be in use in the first half of 2009, and at that time, air conditioners without the logo will not be allowed on the market.
Related enterprises said due to reduced export orders, slower domestic consumption, and the new government energy efficiency standards, domestic air-conditioning enterprises have reduced operating rates and are planning new price promotions to reduce huge inventories. Declines in operating rates at air-conditioning companies has led to a substantial reduction in copper demand.
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