SHANGHAI, Jul 12 (SMM) – Small and medium-sized Chinese manufacturers of brass bar operated at a lower level in June, as tougher environmental restrictions took a toll.
Some plants slashed production, or even closed, as the government tightened environmental restrictions.
An SMM survey showed that operating rates across medium-sized brass bar producers, with annual capacity of 20,000-50,000 mt, averaged 72.8% last month, down 4.01 percentage points from the prior month. The rate for small plants, with annual capacity of less than 20,000 mt, dropped 4.04 percentage points to 86.94%.
This lowered the rate across all 28 producers included in the survey, with total capacity of 1.02 million mt, by 1.53 percentage points to 72.41%, as large plants, with annual capacity of above 50,000 mt, operated at a higher rate of 69.74%, inching up 0.66 percentage point from May.
While a low consumption season weakened orders, the overall decline in operating rates across brass bar producers registered in June was moderate, as they received more orders after copper prices fell on the re-escalation of the US-China trade tensions in May.
Weak copper prices also prompted producers to stockpile finished goods last month.
Stocks of copper scrap, the raw materials for production, at brass bar producers also expanded in June, as fears of smaller supplies after the restrictions on Category 6 metal scrap imports took effect drove scrap users to stockpile.
Even with current adequate supplies, it has been difficult for small and medium-sized brass bar producers to purchase cheaper copper scrap with an invoice, as scrap sellers held back sales to shore up prices.
With faltering demand in a low season, operating rates across Chinese brass bar producers are expected to extend their losses in July, falling 2.35 percentage points from June to 70.06%.
Copper scrap supply decline is likely to squeeze margins across brass bar producers, and erode their production enthusiasm.