[Cu] SMM Survey - Operating Rates at Copper Tube Producers in October

SHANGHAI, Oct. 27 (SMM) -- A recent SMM survey of 20 copper tube producers (total capacity: 1.084 million mt/yr; monthly copper consumption: 66.21kt/month) revealed the following insights:

    1) Operating Rates

    According to the SMM survey, monthly copper consumption at the 20 producers was 66.21 kt during October, with average operating rates 73.3%, up 22.8% YoY, and up 14.1% MoM. Operating rates at copper tube producers were still low in early September as copper tube production was still sluggish following the end of the seasonal low demand period from July to August.  However, the bullish market sentiment in September has improved, resulting in significant MoM growth in operating rates during October. Although operating rates at copper tube producers in October are still down compared with an average operating rate of 80% during April and May, the current 73% operating rate is still a sign that copper tube output remains strong. 

    2) Inventories

    The survey also reveals inventories of raw materials held by copper tube producers accounted for 10.7% of monthly copper consumption, down 1.4% MoM. As copper prices remain high, downstream manufacturers continue to purchase on as-needed basis or until a clear price trend emerges.

    3) Forecast for November Orders

    According to the survey, 75% of producers predict November orders will be flat at October levels. October is considered the traditional peak demand period for copper tubing, but current orders remain relatively unchanged from last month, when orders surged following the end of the seasonal low demand period from July to August. 15% of producers predict orders will decline in November, since in past years, cooling and heating tube producers have usually received their lowest volume of orders during November.  The remaining 10% of producers believe orders will increase in November, based on their belief that October orders were hampered by the National Day holiday, and that orders will likely grow in November.

    4) Forecast for Copper Prices

    According to the SMM survey, 40% of producers predict copper prices will fluctuate based on the belief that any upward movement for copper prices will be limited. 25% of producers believe copper prices will grow further. They said the weakness of US dollar will have great support for copper prices. Another 25% of producers were uncertain about copper prices, since most market insiders were pessimistic about post-holiday copper prices, but LME copper prices climbed unexpectedly, raising uncertainties in copper price trends. The remaining 10% of producers predict copper prices may slide in the foreseeable future.

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