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Copper Semis Enterprises' Four Ways of Easing Capital Pressures
Sep 7,2011 16:11CST
smm insight
Source:SMM
From a recent SMM survey result, cash flow tightness is still an importance problem facing copper processors at present, and they think out four ways to tackle the problem.

SHANGHAI, Sept. 7 (SMM) –From a recent SMM survey result, cash flow tightness is still an importance problem facing copper processors at present. Due to difficulties in getting loans, copper semis processors made painstaking efforts to think out ways of saving costs and reduce capital occupation.    

China's central bank has been carrying out tight monetary policies so far this year, causing heavy capital pressures for enterprises because of difficult loans and higher loan costs. Since copper semis processors have to pay in cash when purchasing refined copper, and their downstream consumers will generally postpone the payment when purchasing copper semis, they are facing more severe cash flow problems.

Based on the SMM survey, copper enterprises have fours ways to tackle capital pressures.

First One: Low inventories. Based on SMM sources, most enterprises maintain inventories of raw material and finished goods at low levels, so as to reduce capital occupation and lessen the losses caused by copper price fluctuations. Taking copper wire rod producers as example, both raw material and finished goods inventories at copper wire rod producers are currently low, only enough for about three days based on the SMM survey result.     

Second One: Shortening the production period. In addition to cut inventories, some copper semis processors also choose to shorten the production period to increase the speed of capital turnover, thus reducing marginal cost. During the current seasonal low demand period, reducing the on-line time period of semi-finished goods and cutting in production period could save capitals, since orders at these copper semis enterprises are weak. 

Third One: Selecting Downstream Customers. Copper semis enterprises prefer to select those downstream producers paying quickly, and try to avoid the settlement method of bank acceptance.

Fourth One: SMM also learns that some enterprises are not hesitant to spend a large sum of money to train their managerial personnel and staff, and introduce scientific management systems, in order to improve overall efficiency through strengthening the soft power.  
 

tight cash flows;four ways

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