SHANGHAI, Nov. 20 (SMM) – Average operating rate at China’s copper plate, sheet, strip, and foil producers rose 0.56% on the month to 62.29% in October as demand downstream remained stable, the most recent SMM survey showed.
The average rate was up 5.89% from a year ago, according a survey of 21 major copper plate, sheet, strip, and foil producers, with total capacity at 976,200 tpy, conducted by Shanghai Metals Market.
Most copper plate, sheet, strip, and foil producers have kept production stable during the second half of this year, with operating rates generally between 61-63% since downstream demand has changed little after massive stock building during H1 2013. Although consumption of copper plate, sheet and strip varied by category, overall output for these products was little affected.
As most enterprises are now confronting year-end financial pressures and since new capacity will come online in the copper plate, sheet, strip, and foil sector, operating rates in this sector was the lowest among all copper semis producers. Despite higher sales, many producers reported limited profit margins due to difficulty in collecting payments and falling processing charges, with some producers even reporting losses. As a result, some producers surveyed by SMM have suspended production. But this boosted orders at those producers still in operation.
Downstream buyers purchased in limited amounts as copper prices fell during November. In addition, liquidity remains tight and loans will come due for repayment by the end of the year. Although these factors may not significantly affect sales of copper plate, sheet, strip, and foil this month, producers may come under increasing pressure in December and adjust production plans for the last month of the year. SMM expects the average operating rate at copper plate, sheet, strip, and foil producers in November to remain close to 62%, probably at 62.14%.
It was also found in the survey that average ratio of raw materials to finished goods at the surveyed enterprises dropped 2% to 20.56% in October. As refined copper supply remained ample, copper semis producers lowered input stocks to control cost, only purchasing spot goods based on production needs. Given tight liquidity by year’s end and bearish mood towards copper market outlook, copper semis producers will unlikely build considerable input stocks.
The proportion of scrap copper to total raw materials consumption of copper plate, sheet, strip, and foil producers fell from 20% to 16.17% during October. The price gap between scrap copper and refined copper continued to narrow in October to about 500 yuan per tonne after copper prices fell below 52,000 yuan per tonne. Lower prices dampened selling interest at some scrap copper sellers, which limited supply of scrap copper and lowered scrap copper consumption at copper plate, sheet, strip, and foil producers.