Seasonal lull keeps China’s copper downstream in reverse gear for 2nd month

SHANGHAI, Aug 1 (SMM) – Major copper downstream industries in China contracted for a second straight month in July, as demand further faltered in a low season.

SMM's purchasing managers' index (PMI) across construction, power, electronics, transportation and home appliance sectors, released on July 31, fell more than expected to 43.18 in July, marking a second straight month when standing below the 50-mark that separates expansion from contraction for three consecutive months.

SMM had expected the reading to slip from June’s 45.99 to 43.47.

The transportation, home appliance and power sectors further weakened as a low consumption season continued, while higher temperatures slowed operations at construction sites.

The growth of 5G kept electronics the best performer last month, but failed to post an expansion as the production of traditional devices slipped in a seasonal lull. Production of 5G product grew moderately as high costs kept manufacturers cautious.

Transportation continued to be the poorest performing sector, as massive sales promotion in June further depressed sales in July. Meanwhile, the summer heat suspended some automakers.

Car dealers offered substantial discounts in the previous two months to clear stocks before the new vehicle emission standards took effect from July.

The electronics sector saw its activity reading for July fall 1.7 from June to 49.01, while the transportation PMI dropped 1.77 to 37.15.

Overall production across copper downstream continued to shrink in July, with the sub-index falling 3.07 month on month to 41.44.

Sales of air-conditioners (AC) weakened as the peak season will end in September. This, together with high inventories, drove AC producers to scale back production.

Shipments from the power sector improved last month, driven by infrastructure projects.

The sub-index for new orders shed 3.4 to 42.44. Demand generally waned in a seasonal lull, but new energy vehicles, 5G devices and base stations, infrastructure projects supported copper consumption.