Copper rod producers to operate at higher rate in Mar as demand improves

SHANGHAI, Feb 22 (SMM) – National policy support on solar, undersea cable industries and investments in electricity grew expectations of higher downstream demand for copper rod in March. This is expected to buoy operating rate across China's copper rod producers then. 

Last month, continued slack demand and earlier CNY breaks lowered production enthusiasm across copper rod producers, an SMM survey found. 

Producers operated at an average rate of 66.30% in January, compared with 74.81% in December and 71.23% in January 2018. The number of surveyed mills expanded from 25 last year to 36 in January, covering capacity of 8.09 million mt. 

In January, downstream sector such as electricity and real estate continued to experience a seasonal lull. This drove copper rod producers to close for CNY breaks or maintenance earlier than previous years in the second half of January. 

SMM learned that downstream orders from the enamelled wire sector weakened, even though some large enamelled wire plants maintained purchases of copper rod during CNY.  

Pre-CNY cash flow issues prompted some copper rod producers to destock and slow down stockpiling raw materials in January. This lowered the raw material inventory to output ratio across those producers. The ratio averaged 11.26% in January, down 0.44 percentage point from December. 

Inventories of finished products at copper rod producers varied in January. While some plants prepared enough stocks of finished products considering late resumption after CNY, some tended to clear out inventories before holiday to ease cash flow pressure. 

For February, CNY closures are likely to further lower the average operating rate by 17.68 percentage points month on month to 48.62%. SMM learned that most copper rod producers resumed after February 19.