SHANGHAI, Aug. 29 (SMM) –A recent SMM survey of 20 major domestic copper wire rod producers (total capacity: 3.63 million mt/yr) revealed the following insights:
1) Operating Rates Up In August
The average operating rate for August at the 20 major domestic copper wire rod producers is 77.6%, up 5% from July’s 72.6%. Most producers, which are concentrated in east China, said demand for power cables improved significantly and that low copper prices was the main driving force behind higher operating rates during August. Copper prices during August fluctuated in a narrow range between RMB 66,000-67,000/mt following significant declines, increasing downstream producers’ interest in placing orders. Some producers in the survey told SMM that higher operating rates were also due to increased orders at wire and cable producers supplying China Southern Power Grid (CSG). However, as enameled wire demand was weak, overall operating rates at copper wire rod producers were negatively affected.
2) Raw Material Inventories Down, Finished Goods Inventories Also Down
Raw material inventories at the 20 surveyed wire rod producers are now 11.0% of production, down 4.3% from July levels. Most producers chose to consume the existing inventories or make limited purchases rather than build stocks given the lack of clear copper price trends. Tight cash flows at the month’s end also made stock building impractical.
Declines in finished goods inventories were due largely to improved downstream consumption. Cash flow pressures also caused wire rod producers to sell goods to generate cash, which resulted in lower finished goods inventories.