SHANGHAI, Jun. 4 (SMM) – SMM's most recent survey of 20 major domestic copper tube/pipe producers (total capacity: 1.2 million mt/yr) yielded the following insights:
1) May Operating Rates at Copper Tube/Pipe Producers Vary by Size
The average operating rate during May at domestic copper tube/pipe producers was 83.00%, basically flat with April's 82.73%. However, detailed data reveals operating rates were not uniform at all size producers. Operating rates at large copper tube/pipe producers rose by 5%, but fell by around 4% and 10%, respectively at medium and small producers. SMM believes the difference in rates was due to two major reasons.
First, high finished goods inventories were mainly concentrated at large air conditioner producers and forced them to slow production in earlier months, dragging down operating rates at large copper tube/pipe producers. However, as these inventories were gradually consumed and the traditional peak demand season drew near, large air conditioner producers increased production slightly, helping increase operating rates at large copper tube/pipe producers in May.
Second, the Chinese government recently issued a new policy titled, Energy-Saving Products and Benefit the Citizens Project-Detailed Implementation Rules for Promoting Energy-Saving Air Conditioners. This policy would require air conditioner producers which apply to join this project should produce at least 100,000 energy-saving air conditioners per year, but would make it impossible for small air conditioners to enjoy this preferential policy, negatively affecting operating rates at small and medium copper tube/pipe producers during May. In this context, SMM believes restrictions in the Chinese housing market and limited increases in demand for air conditioners will cause the average operating rate at copper tube/pipe producers to fall slightly during June.
2) Raw Material Inventories Little Changed in May
Raw material inventories during May at the surveyed copper tube/pipe producers were 12.8% of production, little changed from April. Copper prices experienced volatility during April and May, with spot copper prices falling to RMB 55,425/mt in late May, down sharply from RMB 58,500/mt early in the month. As a result, copper tube/pipe producers remained cautious towards replenishing stocks.