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SMM Cu Survey: Operating Rates at Domestic Copper Wire Rod Producers in August Hit New Low
Aug 23, 2010 14:15CST

SHANGHAI, Aug. 23 (SMM) -- A recent SMM survey of 20 major domestic copper wire rod producers (total capacity: 3.19 million mt) revealed the following insights: 
1) Operating Rates Hit New Low in 2010 

According to the SMM survey, the average operating rate at the 20 copper wire rod producers continues to fall during August, and is now down to 71.0%.  SMM believes the following reasons are behind the low operating rates.  First, consumption was weak during the traditional low demand summer period.  Second, producers in Jiangsu and Zhejiang provinces were forced to cut production due to local power restrictions.  Third,  scrap copper prices have risen slowly as copper prices gained since early August, so copper rod made of scrap has enjoyed greater price advantages compared to rods from refined copper.  Most producers in the SMM survey are large-size producers using refined copper, so they cut production while smaller copper rod producers using scrap copper as raw material were still taking orders. 

2) Both Raw Material and Finished Products Inventories Fall

The SMM surveys shows raw material inventories at the 20 surveyed producers were 13.5% of consumption in August, down from 15.2% in July.  Finished goods inventories were 9.4% of production in August, down from 10.9% in July.  Producers in the survey said they were keeping raw material inventories low to reduce risks given current high raw material prices and weak orders.  The decline in finished goods inventories was due to production cuts brought on by worries over future sales.  Declines in both raw material and finished goods inventories are signs of producer caution towards current copper price rallies.


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