China copper downstream activity contracts for 3 months

SHANGHAI, Sep 3 (SMM) – A low consumption season and adverse weather kept major copper downstream industries in China in reserve gear for the third month in a row in August, but the activity did not contract as fast as expected as the major copper consumer, power sector, saw greater-than-anticipated shipments.

SMM said on Monday September 2 that its purchasing managers' index (PMI) across construction, power, electronics, transportation and home appliance sectors in China rose 3.2 from a month ago to 46.38 in August, marking a third straight month when standing below the 50-mark that separates expansion from contraction.

SMM had expected the reading to slip from July’s 43.18 to 39.99.

A seasonal lull for consumption continued last month, with manufacturers of automobiles, home appliances and electronics further scaling back their operations.

Poor orders and high inventories weighed on the home appliance sector, while production of electronic products, including the closely-watched 5G devices, slipped.

Car makers and dealers saw sluggish sales in a traditional low season, after dealers offered substantial discounts to clear inventories before the new, stricter vehicle emission standards went into effect in certain regions in July. The previously robust new energy vehicle sector also weakened, as orders slipped after the government scaled back subsidies at the end of June.

Typhoons hit eastern and southern China last month, which affected manufacturing and construction. Outdoor operations were also impacted by the hot weather.

Operations across wire and cable producers held stable in July-August, as they needed to fulfill orders from state grid projects. SMM expects a concentrated wire and cable delivery period in the fourth quarter, as the government is likely to step up construction of power projects in the 70th anniversary of the country’s founding.

The sub-index for production across copper downstream sectors climbed 5.97 from July to 47.41 in August, while that for new orders advanced 2.59 to 45.03.

New export orders, meanwhile, shrank faster, with the sub-index slipping from 42.55 to 40.59, as China remained mired in a bitter trade dispute with the US.