SHANGHAI, May 24 (SMM) -- A recent SMM survey of 18 major domestic wire and cable producers (total capacity: 592 kt/yr) revealed the following insights:
1) Operating Rates Improve Steadily
Based on the SMM survey, the average operating rate at the 18 wire and cable producers was as high as 83.3% in May, up both on a monthly and yearly basis. Producers in the survey told SMM that the seasonal peak demand period for wire and cable from March to May is reflected in the steady increase in operating rates. However, those producers voiced concerns towards future orders for three reasons. First, bidding projects from national and provincial power grids have been greatly reduced. Second, project construction in Shanghai and Guangzhou will be restricted due to Shanghai World Expo, which is now underway, and the Asian Games to be held in Guangzhou in November. Third, heavy rains in many regions of south China will hamper local construction, which will also reduce demand for wire and cable. In addition, based on survey result, operating rates at smaller wire and cable producers were down more than rates at medium and large producers since customers for the smaller producers are more sensitive to prices, causing orders to fall sharply in response to copper price declines in May.
2) Raw Material Inventories Remain Stable
The SMM survey reveals raw material inventories at the 18 wire and cable producers were 24.7% of consumption in May, up 1.6% from 23.1% in April. Purchases made on an as-needed basis resulted in stable inventories, with no significant changes reported. More than 50% of the producers say they plan to reduce purchases in the near future due to volatile copper prices, opting instead to consume existing raw material inventories.
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