SHANGHAI, Sept. 5 (SMM) –A recent SMM survey of 20 major domestic copper tube/pipe producers (total capacity: 1.21 million mt/yr) revealed the following insights:
1) Operating Rates Continued to Fall in August
The average operating rate for August at the 20 major domestic copper tube/pipe producers was 69.0%, down 10.8% from July levels, and due largely to weaker demand for refrigeration pipes. Most producers in the survey told SMM that since air conditioner manufacturers ran at low operating rates or even shutdown completely during August, demand for refrigeration pipes fell even further, which negatively affected operating rates at copper tube/pipe producers. Demand for water pipes and seawater desalination pipes, however, remained stable.
A few copper tube/pipe producers in southwestern China said that despite power restrictions, overall production was not significantly affected since many had their own diesel generators to generate electricity for production.
2) Raw Material Inventories Down Slightly
Raw material inventories at the 20 surveyed enterprises were 18.8% of production, down slightly by 1.1% from July levels, and further evidence that weak copper prices during August failed to raise interest in stocking raw materials. Based on the SMM survey, most producers believed current copper price trends were not clear and would not make any large stock purchases hastily. Copper tube/pipe producers were also reducing raw material inventories due to tight cash flows.
Effective September 5th, Chinese banks will now have to include margin deposits as part of the reserve requirement ratio (RRR), which will further tighten market capital. As a result, SMM believes raw material inventories at copper tube/pipe producers will remain low during September.