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Low season continues to weigh on downstream copper
Sep 4, 2018 15:26CST
The PMI stood at 48.37 in Aug as the low season lingered. This is the third straight month with a reading below 50

SHANGHAI, Sep 4 (SMM) – The purchasing managers’ index (PMI) across downstream copper in China remained under 50 in August, signalling contraction as the low season lingered, SMM research found.

The composite PMI came in at 48.37 last month, from 49.28  in July. The figure has stood under 50 for three consecutive months.

Manufacturers operated at lower levels and received fewer new orders last month.

The composite production index stood at 47.5 in August, up 2.53 from July. The continued seasonal lull continued to suppress production enthusiasm among manufacturers. Inclement weather and environmental limitations also affected production in some sectors. With the peak season of September-October around the corner, some producers of large household appliances are likely to step up output.

The composite new order index decreased 2.83 from July to 46.88 in August as consumption weakened and as the number of operating days in the home appliance sector dwindled. Cash flow issues also drove manufacturers to turn down some orders.

In August, prices of raw materials declined as copper prices tumbled on US-China trade disputes. The composite purchasing price index dropped 4.06 from the prior month to 40.57.

While low copper prices could bolster purchasing interest among manufacturers, macroeconomic uncertainty kept them cautious about stockpiling. The composite index for raw material inventory came in at 51.44, down from 58.44 in July. Meanwhile, the index for finished goods inventory fell below 50 to 47.25 in August, compared to 54.05 in July, as a cautious sentiment prompted manufacturers to offload cargoes or to produce after receiving orders.

Factory activity in utilities expanded last month while activity in the other four sectors, construction, electronics, transport and home appliances, contracted.

The composite PMI in the utility sector edged up 0.13 to 51.23 in August, standing 12.59 lower than the same period last year. The production index jumped 8.1 to 51.89 while the new orders index fell 2.19 to 52.31.

Growing investment in power grid consumption raised operating rates across wire and cable plants in August. Shipments for long-term contracts also bolstered production. Fund constraints at small plants drove some orders to flow to medium-sized and large plants. Some plants are likely to reject orders, given the longer time for receiving payments in the power grid industry. End-users were keen to stockpile as copper prices tumbled. This also buoyed the operating rates across wire and cable plants.

The composite PMI in the construction sector stood at 47.73 in August, down 0.09 month on month and 9.32 year on year. Its production index came in at 45.91, down 0.98 from a month ago and 13.1 from a year ago while the new orders index rose 0.27 to 45.57 and stood 16.7 lower than the same period last year.

Rigorous environmental probes and high temperatures slowed operations across construction sites though some sites operated in high gear under cash flow pressure and in anticipation of winter curbs. Stocks of raw materials across those sites were adequate for demand. 

The composite PMI in the electronics sector came in at 49.79, down 0.6 month on month and 4.96 year on year as operating levels continued to fall and as new orders extended their losses. The production index went down 1.06 to 49.92 and the new order index went down 0.96 to 49.11.

Declines in new orders for the auto industry grew last month amid a seasonal lull. Manufacturers also preferred to deplete stocks of raw materials or to purchase on demand, given bearish outlook on the market in September-October. Some export-oriented manufacturers completed some orders in advance on fears of exacerbated US-China trade disputes. The new-energy vehicle sector, however, remained robust.

The composite PMI for the transport sector was 42.25 in August, down 4.3 from a month ago and 15.84 from a year ago. The index for operating levels across the sector dropped 2.58 to 41.72 while the index for new orders slumped 12.29 to 31.32.

Manufacturers of home appliances slowed production in August and some even gave their workers days off. Operating rates across air-conditioner producers also fell from July.

The home appliance sector saw its composite PMI drop 2.1 to stand at 43.73 in August. The production index dropped 6.77 to 37.54 and the new orders index dipped 0.02 to 41.79.


For queries, please contact Frank LIU at liuxiaolei@smm.cn

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