SHANGHAI, Oct. 20 (SMM) -- A recent SMM survey of 20 major domestic medium-and-large copper rod and wire producers (total capacity: 2.72 million mt/yr) revealed the following insights:
1) Operating Rates
According to the SMM survey, the average operating rate at the 20 producers during September was 78.3%, up 2.8% MoM. Producers said post-holiday orders were stable, and most predict orders will remain unchanged for the foreseeable future. A number of producers believe as weather in North China turns colder, demand for copper cable will gradually weaken, but also believe current downstream consumption is relatively stable.
The survey also revealed raw material inventories at the 20 copper rod producers accounted for 17.3% of monthly copper consumption during September, up 0.8% MoM. Finished goods inventories accounted for 16.3%, up 5.9% MoM. Producers said despite stable orders at downstream manufacturers, raw material purchases were limited recently due to higher copper prices and the lack of clear market direction. Producers were purchasing raw materials on as-needed basis and were not interested in replenishing raw material stocks.
3) Scrap Copper
The ratio between refined and scrap copper consumed by the 20 producers during September was 20.9 to 1, down slightly on a monthly basis, but still considered high. Fluctuations in copper prices, reluctance by scrap copper traders to move goods, and firm offers quoted by traders all helped reduce the price advantage of scrap copper, and was the major reason behind the falling ratio.
4) Orders Forecast
According to the survey, 80% of copper rod producers predict November orders will be flat with October levels, and this number is similar to the results of a SMM survey in late August, indicating copper rod consumption was weak during traditional peak demand period from September to November. However, producers said current orders have improved slightly, but remained worse than last year. Hence, orders in November are expected to remain stable.
15% of producers predict November orders will decline, as the traditional low demand period for copper cable is drawing near, which will likely exert negative impact on orders. In addition, the capital pressure by year-end will also help reduce orders.
The remaining 5% of producers predict November orders will increase. They said the end-user replenished stocks before National Day holiday, resulting in relatively higher orders in September, and October orders will decline slightly as a result, and orders are expected to become normal in November.
5) Forecast for Copper Prices
The SMM survey reveals 55% of producers predict copper prices will fluctuate, and most of them believe copper prices will move in the RMB 46,000-50,000/mt range. 20% of producers believe copper prices will edge down, as current copper inventories are relatively high, and copper imports remain high as well, but copper consumption is sluggish, leaving more possibility of downward movement for copper prices, so copper prices will likely move down to test RMB 45,000/mt. 15% of producers were uncertain about copper prices, and the remaining 10% of producers predict copper prices will likely inch up.
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