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SMM Cu Survey: Operating Rates Remain Strong in September at Electric Wire and Cable Producers
Sep 26,2011 13:25CST
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Source:SMM
A recent SMM survey of 20 major domestic electric wire and cable producers (total capacity: 868 kt/yr) revealed the following insights:

SHANGHAI, Sept. 26 (SMM) –A recent SMM survey of 20 major domestic electric wire and cable producers (total capacity: 868 kt/yr) revealed the following insights:

1) Operating Rates Remain Strong in September

The average operating rate at the 20 major domestic electric wire and cable producers through the first three weeks of September is 91.3%, virtually flat with August's 92.1%, but operating rates remain high. Projects from China Southern Power Grid (CSG) and State Grid Corporation of China (SGCC) have been helping push up operating rates at surveyed domestic electric wire and cable producers, and construction at these projects will extend through November. However, demand for electric wire and wire used in motors is down due to lower export orders, while expected high demand for wires and cables for electrical equipments used in China's affordable housing projects has not yet been felt at suppliers.     
  
The larger electric wire and cable producers are able to enjoy advantages in operating rates over medium-sized wire and cable producers, averaging 8% higher in August and 16.1% higher in September. According to feedback from enterprises, cash flow pressures have spread to some medium-sized enterprises since the People's Bank of China (PBOC) began  requiring commercial banks to set aside reserves for three types of margin deposits, including bankers' acceptances, letters of credit, and letters of guarantee. Six major banks, including Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB), Bank of Communications (BOCOM) and Postal Savings Bank of China (PSBC), all completed the first phase of these policy adjustments by September 5th, while other banks complied by September 15th. Tighter credit is slowing approval of enterprise loans and is forcing some to reduce orders in order to ease capital pressures as large amount of money was taken up by raw materials and hedge trading.

2) Raw Material Inventories Down Significantly in September
As copper prices fell quickly during early September, markets became bearish towards future copper prices, forcing electric wire and cable producers to cut raw material inventories and causing raw material inventories to drop by 5% MoM. Those wire and cable producers with orders from the CSG and SGCC are now preparing raw materials in accordance with requirements, while others without orders are waiting for prices to fall further before purchasing raw materials, preferring to consume existing inventories at present. Although SMM conducted the survey in late September and close to China's National Day holiday, falling copper prices and global economic factors are having a greater influence on the decision by domestic eclectic wire and cable producers who choose to reduce or postpone raw material purchases.

 

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