[SMM Analysis] Copper Pipe Enterprises face challenges in the period of low growth in Air conditioning Industry

SMM7 16-month: according to SMM survey data show that the copper tube enterprise start-up rate in June was 86.38%, down 4.55% from the previous month, and continued to decline 9.22% from the same period last year. SMM expects the start-up rate of copper pipe companies to be 7901% in July, down 7.37% from the previous month and down 10.48% from a year earlier, so the decline is expected to be more pronounced in July than in June.

In general, the operating rate of copper pipe enterprises can reflect the performance of the terminal consumption-air conditioning industry. Compared with the same period in previous years, the average operating rate of copper pipe enterprises performed poorly and the downward trend appeared earlier in June. To a certain extent, this shows that the consumption of the air conditioning industry is weak.

First of all, in the domestic consumer market, since 2018, the domestic air-conditioning market has been facing a lot of pressure, the overall growth from high growth to low growth. The year-on-year growth rate of air-conditioning sales in 2017 was 30.5%, but by 2018 the year-on-year growth rate fell sharply to 6.4%. The latest data show that air-conditioning sales in May 2019 showed a negative year-on-year growth rate of-6.9%, and the cumulative year-on-year growth rate from January to May was-1.6%. Therefore, the sales pressure on the air conditioning industry in 2019 is not small.

"View SMM air conditioning production & sales historical data

Before Gree and ox air conditioning space challenge, to a certain extent, can reflect the overall sales of weak background, domestic air conditioning enterprises for the limited market share of the fierce competition. Gree is the leader of the air conditioning industry, ploughing deep in the offline market, and ox online market performance is good, the channel advantage is obvious, the two enterprises compete fiercely, do not allow for the market share.

Air conditioning sales fell more than expected, at the same time, air conditioning high inventory pressure continues to increase. In the case of high air-conditioning inventory, air-conditioning enterprises have gradually slowed down the pace of production, has given priority to the digestion of inventory, feedback to the copper pipe orders have also declined accordingly.

At the same time of poor domestic consumption, weak exports is also one of the reasons that can not be ignored.

Affected by tense trade relations between China and the United States this year, air-conditioning exports have been weak, and exports have fallen sharply from the same period last year. Industry online data show that air-conditioning exports fell significantly this year compared with the same period last year, and began to show negative growth around February compared with the same period last year.

Therefore, the overall consumption of the domestic air-conditioning market slows down and the inventory pressure increases, and the export of foreign markets is weak, which causes the copper pipe enterprises in the upstream of air-conditioning to face the pressure of decreasing orders, thus restraining the copper consumption.

To make matters worse, in order to maintain production to ensure sales, copper tube enterprises have to cut processing fees to attract more orders, corporate profits and operations have been affected to a certain extent.

From the current situation analysis, the follow-up copper pipe demand is not optimistic, so copper pipe processing fees still have a downward trend, superimposed to the middle of July, air conditioning consumption has gradually entered the off-season, copper pipe enterprise orders will also be greatly affected, the follow-up SMM will continue to pay attention to.

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