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Jun PMI in downstream copper fall below 50 amid seasonal lull
Jul 4, 2018 17:00CST
Overall economic activity across downstream copper sectors shrank in Jun as the low season set in and production declined

SHANGHAI, Jul 4 (SMM) – Overall economic activity across downstream copper sectors in China shrank in June as these industries, except for electronics and home appliances, entered the low season, SMM research found. This weighed on production rates across downstream copper sectors. 

The composite SMM purchasing managers' index (PMI) across five downstream sectors of copper in June came in at 46.49, about 0.52 lower than SMM's expectation. This is the first time since March that the figure is below 50, a point that separates expansion from contraction.

Overall production across those sectors fell last month as higher temperatures, the rainy season and cash flow issues hampered consumption. The composite production sub-index lost 12.98 from May to 42.21 in June, with the figure for the power sector sharply down 28.79 to 34.27 in June. Cash issues drove wire and cable producers in the power sector to reduce orders, and this weighed on operation rates. 

Prices of raw materials dipped after a surge last month. Market concerns of a supply shortage grew after Escondida, the world’s largest copper mine, began its labour negotiation earlier in June. SHFE copper prices climbed to a high of 54,580 yuan/mt at one point. As market jitters eased and as the US dollar rebounded, prices of SHFE copper fell and hovered around 51,500 yuan/mt. The composite raw material purchasing price sub-index gained 2.41 and stood at 53.36 in June.

Overall inventories of raw materials across those sectors extended its decline in June as producers were keen to deplete stocks on weakening consumption and cash woes. The composite raw material inventory sub-index came in at 33.46 in June.The finished products inventory sub-index stood at 42.7 as producers tried to deplete stocks of finished products to ease cash flows.

The supplier delivery sub-index came in at 50 in June and delivery durations remained steady from durations in May. 

Most construction sites maintained production schedules. Some sites slowed down or suspended due to tropical storms and torrential rain in the south, the national college entrance examination, the Shanghai Cooperation Organisation Summit in Qingdao, and limited supplies of cement on environmental probes. The PMI for the construction sector came in at 47.34 in June, down 4.04 month on month but up 5.27 year on year.

New orders for passenger or commercial vehicles and auxiliary parts fell last month amid a seasonal lull. Several manufacturers of electric cars received a large and steady stream of new orders on brisk demand. The PMI for the transportation sector came in at 46.46 in June, down 1.69 month on month but up 0.57 year on year.

Bolstered by robust demand from the assembly, power generation and electric welding machinery sectors, the overall electronics sector expanded its economic activity last month with its PMI up 2.25 from May to 52.78 in June. The figure fell 11.9 on a yearly basis.

As the air-conditioning sector entered its traditional high season, the overall home appliance sector saw its production sub-index gain 12.96 to register at 55.48 in June. Its new order sub-index rose 20.83 to 60.84 in June. On a yearly basis, the production figure increased 41.36 and the new order figure climbed 35.91. The property segment also provided some support as the housing market entered the peak season for upgrading air-conditioners. The home appliance PMI came in at 55.05 in June, up 8.5 month on month and 21 year on year.


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