China’s copper downstream contraction slows in Nov

SHANGHAI, Dec 3 (SMM) –  China’s copper downstream industries contracted slower compared to a month earlier in November as production and new orders weakened at a slower pace.

SMM's purchasing managers’ index (PMI) across China’s copper downstream industries, released on Friday, rose to 48.24 for the month, beating previous expectations and up from 46.64 in October. The index stood below the 50-point mark that separates contraction from expansion for a sixth straight month as overall demand remained weak amid a cyclically low season.

The production sub-index climbed 4.07 month on month to 46.59 in November. Despite greater investment in the power and infrastructure sectors, consumption across automobile, home appliance and fixed assets remained sluggish, which suppressed production enthusiasm among producers.

A new orders sub-index, an indicator of future activity, grew to 48.88 in November, up 3.27 from a month ago.

Demand this year faced internal and external pressure. At home, the phasing out of purchase tax cuts on smaller engine cars eroded auto demand while home purchase restrictions bogged the property sector. Consumption across the home appliance sector was poorer than the previous year. Increasingly inclement weather limited construction across the north while construction sites in the south failed to step up rates even as the year draws to a close.

Higher tariffs amid the trade war with the US and a global economic slowdown weakened foreign orders.

In November, plants across China’s copper downstream industries paid less in purchasing raw materials with the sub-index for raw material purchasing prices down 1.24 to 49.63. SHFE copper went down from October.Widened price spreads between copper cathode and copper scrap drove buyers to the cheaper scrap materials, which also lowered spending in raw material procurement.

The sub-index for raw material stocks slid 5.44 month on month to 42.55 last month as tepid consumption, high spot premiums and pessimistic outlooks kept plants being cautious in stockpiling raw materials.

Losses on seaborne materials expanded in late November. This prompted copper smelters to step up export shipments, which shrank supplies to the domestic market and firmed spot premiums. Pessimism also triggered the destocking of finished goods inventory across China’s copper downstream industries.