SHANGHAI, June 7 (SMM) --A recent SMM survey of 19 major domestic copper wire rod producers (total capacity: 3.08 million mt/yr) revealed the following insights:
1) Slight Increases in Operating Rates
Based on the survey, the average operating rate at the 19 major copper wire rod producers was 80.0% in May, up slightly on a monthly basis. Producers contacted during the survey reported no drop in orders for wire rod and with orders still flat at April levels, although some end-users were active in the market after copper prices plunged, actually increasing orders instead. Copper is now in a seasonal low demand period, and 45% of producers surveyed believe orders would begin to drop off in late June or early July, and remain depressed until late August. Approximately 35% of producers in the survey do not expect any changes in orders compared to peak periods and that demand in June-August should remain stable. The remaining 20% of producers were unclear regarding this year's low demand period's trend.
2) Inventories of Raw Materials and Finished Goods Both Lower
The SMM survey also shows the proportion of raw materials held to output at the 19 copper wire rod producers was down from 19.0% in April to 16.8% in May. SMM believes the decline in raw material inventories is a result of a more cautious attitude towards purchasers given the volatility of copper prices since May. However, some producers told SMM that they would replenish raw materials when spot copper prices fell below RMB 50,000/mt. The proportion of finished goods inventory to output also fell to 10.9% in May, down from 12.1% in April. The reason behind the decline in finished goods inventory is risk avoidance, as well as a result of the volume of goods shipped to end-users.
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