Low season keeps downstream copper PMI below 50 in Jul

SHANGHAI, Jul 31 (SMM) - The low season weakened overall economic activity across downstream copper sectors in China in July, except in the power and electronics sectors, SMM research found.

The composite SMM purchasing managers’ index (PMI) in July came in at 49.28, and beat expectations by 2.05.

Downstream producers lowered production in the low season. The composite production index stood at 44.97 in July, up 2.76 from June.

Weaker consumption and cash issues reduced orders during June-July. The composite index for new orders stood at 49.71 in July, up 0.95 on the month.

US-China trade tension weighed SHFE copper prices to 47,520 yuan/mt in mid-July, before China’s positive fiscal policy and a potential strike at BHP Billiton’s Escondida copper mine drove prices back to 50,000 yuan/mt. The composite index for raw material purchase prices dropped 8.73 on the month and stood at 44.63 in July.

Downstream producers restocked actively in July when copper prices plunged. Weakening consumption grew their inventories of finished products. The composite index for raw material inventory came in at 58.44 in July, and the index for finished-product inventory stood at 54.05.

The index for supplier delivery time stood at 50 in July, flat from June.

The composite PMI for the power sector returned above 50 in July as economic sentiment in the industry improved from June. While the composite PMI for the electronics sector stood above 50, that for the construction, transportation and home appliance sectors stood below 50.

Most construction sites stepped up production in July though the adverse weather and environmental inspections limited operations at some sites. The PMI for the construction industry in July rose 0.48 from June but fell 4.4 on the year to 47.82.

Producers of copper wires and cables raised productivity in July as the cash crunch eased. Active downstream stockpiling in the second half of July also drove up operating rates across producers of copper wires and cables. The PMI for the power sector rose 8.61 on the month and 8.14 year on year to 51.1.

New orders in the electronics industry held stable in July, despite the low season. The PMI for the electronics sector stood at 50.39 in July, down 2.39 on the month but up 0.19 on the year.

The transport sector weakened in July from June as the automobile sector continued to be in the low season. Several producers reported brisk production and orders for new-energy vehicles. Brisk orders fuelled production at some export-oriented producers, as US tariffs on Chinese imports loom. The PMI for the transportation sector stood at 46.56 in July, up 0.1 on the month and 2.88 from July 2017.

The seasonal factor slowed production across home appliances in July. The real estate market lowered productivity across the air-conditioner sector in July. China’s output of air conditioners in the first half of the year increased 14.4% on the year, according to the National Bureau of Statistics (NBS). The PMI for home appliances came in at 45.83 in July, down 9.22 from June but up 3.77 year on year.