SMM Cu Survey: High Operating Rates at Domestic Copper Tube Producers

SHANGHAI, Feb. 8 (SMM) --

A recent SMM survey of 18 domestic copper tube producers (total capacity: 1.07 million mt/yr) revealed the following insights:

1) High Operating Rates
According to the survey, overall operating rates at the 18 domestic tube producers were 70.0% in February, up slightly from December levels of 68.5%.  It is normally the seasonal high demand period for copper tubes at air-conditioner manufacturers from December, and large  copper tube producers are reporting strong downstream demand, resulting in high operating rates. 
SMM believes operating rates will begin to drop in mid-February as small and medium-size copper tube producers suspend production for the Chinese New Year holiday.  Recent strong demand for copper tube is due mainly to a strong performance by the home appliance sector in late 2009. China’s air-conditioner output dropped in 2009, and since previously build-up stocks have been consumed, conditions are now in place for a rebound in output of air-conditioners.

2) Raw Material Stocks Up Significantly Due to Stock Replenishments
The survey shows raw material stocks at the 18 copper tube producers were 18.4% of consumption in February, up 5.2%.  Rising raw material inventories were due largely to the following two reasons.  First, overall operating rates at copper tube producers have been high, and producers built moderate stocks due to post-holiday optimism.  Second, traders will close next week for the Chinese New Year holiday, while many producers are planning to maintain production during the holiday, resulting in higher raw material stocks.

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