SHANGHAI, Jul. 16 (SMM) - A recent SMM survey of 21 major domestic copper tube/pipe producers (total capacity: 1.33 million mt) revealed the following insights:
1) Average Operating Rate Down to 77.65% in June
The most recent SMM survey of major domestic copper pipe/tube producers found the average operating rate in June fell sharply to 77.65%, down 12.47% MoM and 2.57% YoY. The rates at larger producers were down more than 10% since the low season for air-conditioners had a greater impact on them. The declines at small and medium producers were less than 5% MoM. In addition to the low demand season, the recent liquidity crunch also negatively affected production. During June, discount rates rose to as high as 13%, so significant financial costs caused those producers with tight liquidity to take fewer or even refuse orders. As some air conditioner producers now close due to high temperatures in July, demand for copper tube/pipe will fall even further, so the average operating rate at tube producers will fall to 75.69%.
2) Raw Material Inventories Grow to 13.60% in June
The survey results also show raw material inventories as a proportion of production at the copper tube/pipe producers were up by 1.12% MoM to 13.60% in June. As copper prices fell below RMB 50,000/mt in late June, buying interest in raw materials picked up. Tight liquidity, however, encouraged qualified producers to import goods using L/Cs, which resulted in virtually no declines in raw material inventories during a low demand period.