SHANGHAI, Nov. 25 (SMM) - Recent sharp gains in copper prices bit into profit at some copper wire & cable producers. Are they really significantly hurt by this?
SMM understands these producers acted in the face of surging copper prices.
Some copper wire & cable producers peeled finished products and then sold them to scrap copper producers, so as to gain higher profit. These producers had high finished product inventories on hand due to surge in copper prices.
Besides, some producers decide finished product selling prices according to copper price fluctuation, SMM added. Some sold finished product inventories produced over the past few months. Hedge operation helped some producers reduce negative effects from rising copper prices, and even left some profit.
Almost all copper wire & cable producers plan to hike selling prices in the near term in the face of higher cost. Some producers increased raw material inventories out of concerns that copper prices will rise further.
Some copper wire & cable plants reported falling profit or even severe losses after copper prices increased drastically, so they breached contracts with copper rod producers due to heavy cost burden, especially those that had locked finished product prices. So some copper rod producers were negatively affected by this, one copper rod producer told SMM. Nonetheless, only limited producers broke contracts with them to secure trading reputation.
SMM understands some copper rod producers increased use proportion of scrap copper as the price spread between refined and scrap copper expanded recently. Some copper rod plants using refined copper as raw materials were affected as producers using scrap copper gained higher market share.
Nonetheless, this gave limited effect on refined copper demand due to technical and quality requirements and low base for copper rod produced with scrap copper, SMM said.
Copper wire & cable plants still execute existing orders, so their purchase for copper did not decrease despite rising copper prices, SMM finds. Orders in November remained largely flat at October’s thanks to large power grid projects.
As copper wire & cable producers’ ability in risk aversion has improved, they were not impacted significantly by surging copper prices.