[SMM analysis] the downstream export problem continues to ferment, and the situation of brass rods is not optimistic.

SMM5 March 15:

In April, the average operating rate of brass rod enterprises was 66.06%, down 7.88 percentage points from the previous month and 13.59 percentage points from the same period last year. The main reason is that downstream orders such as plumbing and plumbing of brass rods have been plagued by the overseas epidemic.

Separately, the operating rate of large enterprises (annual production capacity ≥ 50,000 tons) is 70.99%, down 2.73 percentage points compared with the previous month. There are more types of products, and the demand for high-end products, medical treatment, 5G communications and other sectors has increased against the trend, offsetting the weakening of orders in the downstream of some plumbing and sanitary ware, and the overall operating rate is more than 70%.

The operating rates of medium-sized enterprises (20,000 tons ≤ annual production capacity < 50,000 tons) and small enterprises (annual production capacity < 20,000 tons) were 64.94% and 55.28%, respectively, down 11.88 and 7.42 percentage points compared with the previous month. The downstream of small and medium-sized enterprises is mainly plumbing and sanitary ware, the direct impact of poor export orders on enterprises is greater, and the survival situation of individual small enterprises mainly engaged in export is more severe.

From the perspective of inventory, the inventory level of waste brass raw materials in different enterprises is different, and the production inventory is from one week to more than a month, but the enterprise as a whole feels that the waste copper raw materials are still difficult to supplement from the market; at the same time, the tax price of waste copper is on the high side, directly chasing electrolytic copper, which also leads to some brass rod enterprises mainly purchasing electrolytic copper with zinc ingots for production. Due to the variety of raw materials that can be used, the shortage of scrap copper supply does not have much impact on the normal production of enterprises, which is far less severe than the waste copper rod industry.

The operating rate of brass rod enterprises is expected to be 63.06% in May, down 3 percentage points from April and 13.82 percentage points from a year earlier.

Judging from the expected orders of enterprises, some of the orders accumulated as a result of the epidemic still need to be completed, which will boost production, but it is generally believed that it is difficult to improve overseas orders in May, and copper bars are gradually entering the traditional off-season of consumption. I am worried that copper bar orders will deteriorate from May to June. In addition, according to SMM, environmental protection during the epidemic this year did not do much inspection, but last month basically returned to normal, did not see the local government issued a new policy, but only to be more and more stringent.