SHANGHAI, Aug. 15 (SMM) –A recent SMM survey of 19 major domestic copper tube/pipe producers (total capacity: 1.16 million mt/yr) revealed the following insights:
1) Operating Rates Down In July
The average operating rate during July at the 19 major domestic copper tube/pipe producers was 79.8%, down 2% from June. In addition to the impact from the seasonal low demand period during July, spot copper prices were up sharply from June levels, averaging between RMB 71,000-72,000/mt, which depressed already low demand for copper tube/pipes. Based on SMM data, larger producers maintained relatively high operating rates, an indication of their strong financial strength and competitive power even during the low-demand season. The drop in operating rates was mainly found at medium-size and smaller producers, which reported fewer orders and were more sensitive to soft demand and higher copper prices.
2) Raw Material Inventories Up Slightly
Raw material inventories during July were 19.9% of production, up slightly from June levels. Since copper prices were experiencing volatility during the SMM survey period, the surveyed producers said they chose to replenish stocks whenever copper prices declined, but without knowing the lowest price, which resulted in slight increases in raw material inventories. However, as copper prices continued to fall, copper tube/pipe producers, as well as downstream enterprises, stayed out of the market until a clearer price trend was visible. This most recent round of copper price declines totaled RMB 4,000/mt, which still failed to boost market demand. Many producers said orders in August will be down from July, so SMM believes stock replenishments will not occur in the foreseeable future.