SHANGHAI, July 19 (SMM) - A recent SMM survey of 20 major domestic copper wire rod producers (total capacity: 3.15 mmt) revealed the following insights:
1) Operating Rates Fall
Based on the SMM survey, the average operating rate at the 20 copper wire rod producers was 75.7% in July, down 4.3% from the 80.0% rate in late May and early June. SMM believes the decline in operating rates is mainly attributed to the current low demand period at cable and enameled wire producers. Demand for cable has been negatively affected by the slower pace of construction due to hot weather. In addition, the summer break period in the EU and US has also depressed exports of enameled wire. Producers in the survey also told SMM that operating rates at producers have not fallen significantly so far, but waning demand will likely delay orders, increasing existing inventories of finished goods. If pressure from higher inventories grows, operating rates at producers will likely fall further.
2) Raw Material Inventories Fall, Finished Goods Stocks Flat
The survey also shows that raw material inventories at the 20 surveyed producers in July were 15.2% of consumption, down from 16.8% in June. As a result of falling orders, producers were generally pessimistic towards the near-term outlook, and in order to reduce risks, were exercising caution when purchasing raw materials. Many producers normally hold raw material stocks enough for 1-2 days consumption. The proportion of finished goods inventories was 10.9%, flat with previous levels. SMM believes that end-users will delay the pick-up dates for goods if demand continues to weaken, and if copper prices continue to fluctuate, will result in higher stocks of finished goods.
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