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SMM Exclusive: Why Chinese Copper Wire Rod Capacity Expansion Aggressive

iconSep 18, 2012 14:36
Source:SMM
According to SMM statistics as of September 10, 2012, new copper wire rod capacities will reach 3.89 million mt/yr in the next three years.

SHANGHAI, Sept. 11 (SMM) – SMM found in its latest survey of copper wire rod producers that copper wire rod projects of different sizes have been frequently coming on stream. According to SMM statistics as of September 10, 2012, new copper wire rod capacities will reach 3.89 million mt/yr in the next three years. There were 2.545 million mt/yr capacities that commenced production during 2011, so the average growth rate can reach 17.6% in the coming three years. 
 

Key Expansion Projects at Copper Wire Rod Producers 2012 (Million Mt/Yr)

Company

Newly-Expanded Capacity

Estimated/Actual Production Time

Yanggu Xiangguang Copper Co. Ltd.

32

May 2012

Jiangxi Copper Co., Ltd.

40

Aug 2012

Anhui Xinke New Materials Co., Ltd.

12

Dec 2012

Jiangxi Longma Industry Co., Ltd.

3

Dec 2012

Chinalco Kunming Copper Co., Ltd.

20

Early 2012

Shandong Hengyuan Copper Co., Ltd.

17

Late 2012

Jiangsu Tiandilong Group

25

Late 2012

Changzhou Dajiang Copper Industry Co., Ltd.

25

2013

Amer International Group

50

2013

Hanjin Futai (Yangzhou) Copper Industrial Co., Ltd.

30

1H 2013

Guangxi Nonferrous Metals Recycling Co., Ltd.

20

Unclear

Shanghai Chenli Investments Co., Ltd.

40

Unclear

Jiangsu Baosheng Group

30

Late 2013

Jiangxi Xinjinye Industrial Corporation Limited

5

Unclear

Tianjin North China Group

10

Unclear

Jinchuan Group

30

Unclear

Total

389

 

 

 

Major copper wire rod producers have been expanding projects since early 2012, and after analyzing the nature of these projects, SMM found that nearly 50% of these producers chose to extend projects downstream, 30% upstream, and 20% opted to extend in copper processing industry. This formed the trend that upstream producers extended the downstream chain, and terminal producers extended upstream chain.

SMM also found that capacity expansion of copper wire rod industry developed faster than other copper semis industries, and due largely to the following reasons:

1. Copper Wire Rod Producers Contribute More to Copper Semis Output

According to the above chart, copper rod industry accounted for 52% of copper semis output in 2011. Therefore, capacity expansion at copper rod producers should be absolutely faster than other copper semis producers given the same growth rate.

2. Copper Rod Producers Have Relatively Good Prospects
Copper wire rods are mainly applied as raw materials of electric wire and cables, and as electric wire and cable industry has gained comparatively stable growth now that China’s government invested in infrastructure of the power industry, copper wire rod industry has been supported.

 

Against the backdrop of slowing global economic growth, all industries have been negatively affected to different degree. It can be seen from the above chart that operating rate at copper wire rod producers had been increasing steadily during January-August 2012, but the rate slipped at copper tube/pipe producers as well as copper plate, sheet, and strip producers in the face of sluggish downstream consumption and decreasing exports. Therefore, copper wire rod industry can attract more investments in capacity expansion of all downstream industries.

 

3. Copper Wire Rod Projects Report “Low Investments, But High Production Value”
Of the five downstream industries in the copper processing industry, investment in copper wire rod projects is the best choice from investment periods and barriers of entering the industry, and enjoys the advantage of “low investments, but high production value”. In addition to a shorter production time than other copper semis industries, copper wire rod industry has a wide range of downstream industries and thus enjoys better market circulation. According to semi-annual reports, Anhui Xinke New Materials’ designed investment in 40,000 mt high precision electronic copper strip project is RMB 1.2 billion, and Jiangxi Copper’s estimated investment in 400,000 mt copper wire rod project is RMB 430 million. In order to achieve long-term sales target, companies will first consider copper wire rod projects.

4. Copper Wire Rod Expansion Has Industry Strategic Significance
China’s copper semis processing industry faces problems of scattered companies, chaotic quality, and a large number of small companies. Integration or expansion is a positive step for some competitive companies in the face of sluggish market. Considering future quality supervision for China’s electric wire and cable industry and other industries, quality requirements for upstream raw materials are becoming higher and higher. In this context, capacity expansion at copper wire rod producers is of great significance over the long term.

As large-scale copper wire rod capacities commence production, downstream consumption capacity will suffer server tests. Operations of large volumes of copper wire rod will provide high-quality raw materials for electric wire and cable producers, magnet wire producers, and other downstream producers and dampen processing fees amid excessive capacities.

In SMM’s view, for companies that have upstream producers (copper smelters), they can secure raw material supply. Nevertheless, for those who do not own upstream producers, production of large-scale copper wire rod capacities can lead to raw material supply shortages for them, especially for companies that are both involved with copper smelting and copper wire rod production. This can also pose some pressures for these processors’ long-term existence.

copper wire rod
capacity
copper wire rod producers
copper semis

For queries, please contact Michael Jiang at michaeljiang@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn

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