SHANGHAI, Jun. 11 (SMM) – A recent SMM survey of 22 major domestic copper wire rod producers (total capacity: 3.55 million mt/yr) revealed the following insights:
1) May Average Operating Rate Rebounds
The average operating rate during May at domestic copper wire rod producers was 73.31%, up 1.65% MoM, and the first increase following declines in March and April. Spot copper prices fell from RMB 58,500/mt in early May to RMB 55,425/mt at the end of the month, a drop of over RMB 3,000/mt, which enticed downstream enterprises to place orders in order to cut production costs. Downstream enterprises especially increased purchases of raw materials as spot copper prices fell below RMB 56,000/mt, helping the average operating rate at copper wire rod producers rise to 73.31%. However, since wire and cable producers will not be bidding on large scale projects in the near term, SMM believes the average operating rate at domestic copper wire rod producers will not increase further during June.
2) Raw Material Inventories Increase, Finished Goods Inventories Remain Unchanged
Downstream producers using copper wire rod as a raw material bought aggressively during May as copper prices fell, raising interest at copper wire rod producers for increasing raw material stocks. As a result, the proportion of raw material inventories to production rose by 2.6% in May, to 17.2%. Later, however, as copper prices faced greater risk to fall further, copper wire rod producers’ purchasing interest abated, keeping finished goods inventories flat with April levels. Finished goods stocks have yet to fall significantly so far this year, a sign that copper wire rod consumption remains sluggish.