SHANGHAI, May 28 (SMM) – A recent SMM survey of 20 major domestic wire and cable producers (total capacity: 934,000 mt/yr) revealed the following insights:
1) May's Average Operating Rate Remains Flat with April
The average operating rate during May at wire and cable producers was 73.4%, virtually flat with April's 74.2%. Since the number of new power projects did not increase significantly in May, overall wire and cable demand remains sluggish. Copper prices have been falling since early May and have heightened market pessimism, depressing purchases of wire and cable in order to minimize risk from volatile copper prices. In addition, the pace of Chinese railway construction has fallen off noticeably, further depressing wire and cable orders. HSBC's flash May PMI for China fell to 48.7%, the lowest level for two months and another sign of market weakness. Although positive news of new government economic and incentive policies were announced recently, these measures will not have an immediate impact on markets. In this context, SMM believes the average operating rate at wire and cable producers is unlikely to increase significantly until the second half of this year.
2) Raw Material Inventories Edge Higher
Raw material inventories during May at wire and cable producers were 25.8% of production, up slightly from April's 24.1%. Some of these producers were holding agreements for orders from China Southern Power Grid (CSG), and opted to buy raw materials when copper prices were lower during May and lock in profits, despite delivery dates in July and August. As a result, raw material inventories at these wire and cable producers rose only marginally in May.