SHANGHAI Jun.20 (SMM China) -- A recent SMM' s survey of 18 domestic major copper cable producers (total capacity: 803kt/yr) revealed the following insights:
1) Operating Rates
The overall operating rates of those 18 copper cable producers were 71.4% in June, up from 69.8% in May, but down from 74.2% on a YoY basis. Of these, demand of the electric cable producers recovered and a limited number of producers said to run at full operating rates. Falling copper prices also stimulated those producers' purchasing interest. While the communication cable producers reported they were running at low operating rates, affected by reconstruction of telecom industry and optical fiber's substitute for copper cable.
2) Inventories of Raw Materials
Inventories of raw materials held by those producers grew, accounting for 14.9% of those producers' total monthly copper consumption. The majority of copper cable producers were cautious in purchasing due to pessimistic outlook at copper prices. On June 7th, China's Central Bank determined to raise 1% of deposit reserve ratio for deposit financial institutions, and lifted 0.5% of deposit reserve ratio on June 15th and 25th successively, exerting cash flow pressure on copper cable producers.
3) Has the Era of Optical Fiber's Substitute for Copper Cable Come?
SMM had ever mentioned that optical fiber would substitute for copper cable in the previous reports. According to SMM's survey, decreasing copper consumption in communication cable producers was a good example for illustrating the trend.
Although copper cable could not be replaced by optical fiber in the aspect of power supply, optical fiber will take place of copper cable in the cabling system in the future. The rapid development of computer technology has provided a good precondition for the development of optical fiber, the bandwidth of copper cable will unlikely meet the requirement of data transfer rate in the future, while optical fiber will meet the demand.
4) Demand for Copper Cable During the Post-earthquake Reconstruction Will Unlikely Greatly Stimulate Copper Consumption
On May 21st, China's State Council announced the Ministry of Finance would allocate RMB 70 billion for the post-earthquake reconstruction, and would continue to assign funds in the following years. The post-earthquake reconstruction fund will be mainly used in rebuilding damaged infrastructures and public facilities.
Copper cable producers said the post-earthquake reconstruction would exert limited positive impact on demand for copper cable, and amount of civil cables and overhead power lines will see increases. An officer of one major copper cable producers said proportion of cable copper only accounted for 5% of the total reconstruction funds of RMB 70 billion, and will unlikely greatly stimulate copper consumption.
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