SHANGHAI, Jul. 30 (SMM) – A recent SMM survey of 20 major domestic electric wire and cable producers (total capacity: 989,500 mt/yr) revealed the following insights:
1) July Average Operating Rate Down to 74.11%
The average operating rate during July at domestic electric wire and cable producers fell to 74.11% following a brief rebound in June, down by 3.67% MoM and 17.49% YoY. The surveyed producers told SMM that since the number of large projects now under construction has fallen since 2H 2011, many producers are now only processing smaller orders. As the weather becomes hotter, laying wires and cables is more difficult, and this slowing of construction has also caused orders to slip. In addition, delivery dates for orders from the China Southern Power Grid remain unfixed, which restricted production at these electric wire and cable producers.
The YoY drop in the average operating rate was extremely pronounced, another strong sign that China's economic growth has slowed, while falling growth rates in fixed asset investments also cut demand for electric wires and cables. According to the NBS, the growth rate for total floor space of buildings completed has fallen steadily during 1H, and was down to only 12.8% YoY in June, the lowest since early 2011. The growth rate for floor space under construction was only 17.3% YoY in June, which will also limit growth in demand during 2H 2012 for electric wire and cable.
2) Raw Material Inventories Up Slightly
As copper prices fell below RMB 55,000/mt in late July, some of the surveyed electric wire and cable producers became more interested in increasing raw material stocks. However, they were still relatively cautious given falling orders and since they did not believe copper prices would fall unilaterally. As a result, raw material inventories during July at these producers increased only slightly to 24.61% of production.