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[SMM Analysis] the epidemic situation in China gradually subsided in March the operating rate of copper rods increased by 28.84 percentage points over the previous month.
Apr 3,2020 18:54CST
The content below was translated by Tencent automatically for reference.

SMM, 3 April:

According to SMM research data, the operating rate of copper rod enterprises in March was 54.70%, up 28.84 percentage points from the previous month, and down 22.48 percentage points from the same period last year.

The copper rod operating rate rebounded sharply in March in line with our expectations. According to the feedback of most enterprises, the basic recovery rate of copper rod enterprises in March was 80%-90%. There was a large backlog of orders in the first two months of the epidemic. After most enterprises resumed work in March, they basically began to digest the backlog of orders step by step. Logistics was basically fully liberalized in early March, especially from mid-March to late March. The problem of inter-provincial transportation has been basically solved, and the employment rate of employees has also increased, and most of the resumption of production is normal; However, due to the outbreak of the overseas epidemic in March, some enterprises with export business are facing the problem of unable to issue foreign trade orders, and the volume of exports has declined.

In March, the raw material inventory ratio of refined copper rod was 13.69%, which was 12.12% lower than that of the previous month. The decrease in raw material inventory ratio is mainly due to the sharp increase in output in March compared with February, rather than a sharp decline in the willingness of non-enterprises to hoard raw materials. On the contrary, from the absolute amount of raw material inventory, March increased more than February, first of all, because in March, with the increase in the resumption of production in downstream wire and cable, enamelled wire and other industries, the demand for copper rods increased, and copper rod enterprises actively purchased and prepared production. Secondly, due to the sharp fall in copper prices in March, some enterprises also have low procurement of electrolytic copper raw materials for inventory, so the absolute volume of the overall raw material inventory has risen month-on-month.

According to SMM research, the operating rate of refined copper rod enterprises is expected to be 58.92% in April, up 4.22% from the previous month and down 19.36% from the same period last year. Most companies reported that production in April was expected to remain flat or slightly higher than in March, but there was no expectation of a sharp rise, which was still a big drop from a year earlier. The main core concern remains when the overseas epidemic can be brought under control in the first half of the year. First of all, as the number of imported cases in China is still increasing every day, it is still difficult to estimate when the terminal industry will completely recover, and the recovery process of construction real estate, power grid and other industries is still relatively slow. Some copper rod enterprises reflect that the orders of downstream enamelled wires, cables and other industries are good, but the picking up of goods is still not active, mainly due to the inactive delivery of goods by their downstream end users, and the increase in the inventory of finished products will also affect the large-scale production of enterprises. Second, the impact of the overseas epidemic has also had an impact on the export business of some enterprises, resulting in a reduction in the positive willingness of enterprises to produce; finally, as the global economy has been hit by the epidemic and accelerated the economic recession, the market is still not optimistic about consumer demand for the whole year, so the year-on-year decline is still expected to be relatively large.


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