SMM Cu Survey: Average Operating Rate for February Surges by 20.63%

SHANGHAI, Mar. 26 (SMM) –SMM's most recent survey of 20 major domestic copper plate, sheet, strip, and foil producers (total capacity: 895,000 mt/yr) yielded the following insights:

1) Average Operating Rate for February at Copper Plate, Sheet, Strip, and Foil Producers Surges by 20.63%
The average operating rate for February at the copper plate, sheet, strip, and foil producers SMM surveyed was 62.18%, up 20.63% from January. Orders of copper plate, sheet, strip, and foil improved gradually during February, but orders for electric and energy strips were strong. Automobile strip orders were modest, but orders for strips used in home appliances were disappointing.

The average operating rate at copper plate, sheet, strip, and foil producers increased sharply in February, but should not be considered a sign of robust demand for a number of reasons. First, the average operating rate at these producers was only above 60% during August 2011, so it was a rare occurrence in February. Second, exports of downstream products have remained sluggish since 4Q 2011 and there is little expectation of any significant change in conditions. Third, the struggling Chinese housing market has depressed the home appliance and construction sectors, negatively affecting demand for copper plate, sheet, strip, and foil. In this context, SMM believes overall demand for copper plate, sheet, strip, and foil will likely remain weak during 1H 2012, and actually fall compared to the same period from 2011. Any further improvements in operating rates at domestic copper plate, sheet, strip, and foil producers will also be limited.

2) Raw Material Inventories Remain Low in February
Raw material inventories at the domestic copper plate, sheet, strip, and foil producers were 18.54% of production in February, considered low and actually down 5.46% from the previous month. Most producers told SMM there was little point in increasing raw material inventories since copper prices were not expected to rise. In addition, cash flow problems have only improved marginally, so producers are unwilling to increase raw material inventories until orders improve.