SHANGHAI, Mar. 13 (SMM) – Average operating rate at Chinese copper wire rod producers plunged 11.74% in February to 55.55%, due in part to the limited number of working days in the month, SMM’s latest survey of 22 producers showed.
Since workers returned home for holiday, most construction work slowed, curtailing demand for electric wire and cable. However, some wire rod manufacturers were still supplying goods for enameled wire producers in early February since enameled wire demand remained strong, but the lack of orders from the power cable sector pulled down operating rates at copper wire rod producers.
Enameled wire demand strengthened in March, driving up copper wire rod consumption, with medium and large-size enterprises reporting an increase in orders. However, copper wire rod demand from power cable enterprises was still recovering slowly. Lower post-holiday copper prices squeezed margins at copper semis producers and even end users which had earlier built raw material stocks at higher prices, with some even reporting losses. This will negatively impact copper consumption during March. Operating rate at copper wire rod producers is expected to rise to only 70.52%.
Ratio of raw material stocks to finished goods at the surveyed producers rose slightly to 16.42% in February. Some enterprises had built stocks ahead of the holiday due to fears of transportation problems, but most enterprises now plan to cut purchases given post-holiday price declines, and will mainly deplete those inventories built earlier at higher prices. As a result, the ratio of raw material stocks may decline in March.