SHANGHAI, Apr. 16 (SMM)–A recent SMM survey of 22 major domestic copper wire rod producers (total capacity: 3.64 million mt/yr) revealed the following insights:
1) Average March Operating Rate at Copper Wire Rod Producers Down Slightly
The average March operating rate at domestic copper wire rod producers was 74.73%, down slightly from February, but still up significantly from the same period last year. The YoY growth was mainly due to the fact that the Chinese New Year holiday period in 2011 fell in February and caused copper wire rod markets to improve slightly in March 2011. Due to positive expectations towards markets during February this year, operating rates at those copper wire rod producers contacted by SMM increased significantly in March, also leading to significant increases in copper wire rod supply. However, due to weak demand for electric wire and cable, as well as enameled wire, finished goods inventories could not be digested, causing processing fees for copper wire rod in some regions to fall below production costs. In response, some copper wire rod producers began to adjust strategies in early March, cutting production and increasing selling efforts.
2) March Raw Material Inventories at Copper Wire Rod Producers Fall, Finished Goods Inventories Increase
Raw material inventories during March at surveyed copper wire rod producers were down by an additional 1.46% of production compared to February for two reasons. First, demand has remained relatively soft, even during the traditional high demand period, so producers had little interest in building stocks. Second, spot copper prices have been fluctuating narrowly around RMB 60,000/mt since mid-January, turning producers cautious towards risks of stockpiling raw materials.
Finished goods inventories at surveyed copper wire rod producers rose further in March, up to 12.49% of production and remaining above 10% for a third straight month. Demand for copper wire rod has remained weak since early 2012 and even during the peak demand period. Bidding opportunities from China's power investment projects are also down, adding to finished goods inventory pressures at copper wire rod producers.