SHANGHAI, Aug. 8 (SMM) –A recent SMM survey of 20 major domestic copper wire rod producers (total capacity: 3.31 million mt/yr) revealed the following insights:
1) Operating Rates Continue to Fall in July
The average operating rate at the 20 major domestic copper wire rod producers was 72.56% in July, down 3.71% from June, and due largely to the seasonal low demand period. Spot copper prices in early July surged to above RMB 70,000/mt, up from RMB 68,000-69,000/mt, but then remained high in the RMB 71,000-72,000/mt range, which took markets by surprise, dampening market demand. China’s Central Government has not yet made any adjustments to current monetary policies, but acted to curb consumer prices through regulations. One result was tight cash flows at copper wire rod producers, further weakening copper demand.
2) Raw Material Inventories Down, Finished Goods Inventories Up
Raw material inventories at the surveyed wire rod producers were 14.25% of production in July, down 2% from June. In addition to weak copper rod demand, higher copper prices greatly dampened copper rod producer interest in purchasing raw materials. Tight cash flows also forced producers to cut raw material inventories.
In contrast, finished goods inventories during July were up MoM due to sluggish market demand since downstream consumers were consuming existing inventories rather than purchasing new raw materials as monthly spot copper prices rose by RMB 2,600/mt.