SHANGHAI, Nov. 21 (SMM) – 85% of Chinese copper plate, sheet, strip and foil producers expected orders to be virtually unchanged in November, a Shanghai Metals Market survey showed.
SMM surveyed 21 major Chinese copper plate, sheet, strip and foil producers, with capacities totaling 976,200 tonnes, and found 85% of them expecting little changes in orders in November. The prevailing as-needed purchase approach among downstream enterprises and no significant boost in exports from this year’s upcoming Christmas holiday led to the conclusion. Some downstream manufacturers of high-end producers would adjust the level of inventories due to squeezed profits and fierce competition, limiting the growth of demand.
10% of them believed that orders would fall in November. Downstream producers postponed procurement plan from November, significantly reducing on-hold orders of copper plate, sheet, strip and foil manufacturers. Year-end cash crunch not only affected downstream producers in purchases, but also copper plate, sheet, strip and foil producers in production, which was expected to fall in November and December.
The rest 5% of producers expected orders to grow in November. The growth of new orders, not driven by consumption improvement, would come from one plate, sheet and strip producer due to production suspension.
As to price outlook, 33% of producers expected copper prices to fluctuate between $ 6,900-7,100 per tonne. After copper prices fall below 50,000 yuan per tonne, buyers would enter the market for purchases. A rapid drop in copper prices would greatly reduce supply of scrap copper, and the narrowed price gap between refined and scrap copper put refined copper consumption in a favorable position. Without further demand deterioration, copper prices would not weaken further.
24% of them were pessimistic towards the outlook. Copper prices fell after the conclusion of China’s CPC Central Committee meeting in early November, as the reform agenda did not cater to market expectations. On the market fundamental side, inventories were growing, and suppliers were eager to move goods for cash generation at the end of the year. Downstream demand, however, was not expected to improve much as year-end tight liquidity also troubled them. An absence of major positive news would also restrict speculative activities. All of these would send copper prices lower.
10% of producers believed copper prices would return to $ 7,100-7,300 per tonne. The US QE tapering may not happen in the short term given Janet Yellen’s dovish tone, the successor to Ben Bernanke, the US Federal Reserve chairman. The Eurozone’s interest rate cut compounded their optimism.
The rest 33% of them were unclear over the direction.