China copper downstream PMI slid below 50 in September

Published: Sep 29, 2020 16:28

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Manufacturing activity across Chinese copper downstream industries unexpectedly slid into contractionary territory even in September, a typical high season.

SHANGHAI, Sep 29 (SMM)—Manufacturing activity across Chinese copper downstream industries unexpectedly slid into contractionary territory in September, a typical high season.

SMM data showed that the purchasing managers’ index (PMI) across China’s construction, power, electronics, transport and home appliance sectors slipped 0.48 to 49.58 in September from August. The 50-point mark separates expansion from contraction on a monthly basis.

The composite sub-index for production in September slid 1.26 points from a month ago to 49.13, falling into contraction. Real estate control policies limited financing in the construction sector and slowed down production. Weaker investments in electric grid drove cable producers to lower operating rates. However, operating rates in the electronics sector rose significantly, as Apple, Huawei and other new smart phones are about to go on sale. Operating rates also improved in the home appliance sector as manufacturers came back from the summer break.

The overall sub-index for new orders across downstream copper sectors lost 0.47 point to 48.94 in September, staying in contraction. New orders sub-indexes in the construction and power sectors both dropped by more than one point in September due to macro-controls by the government, but new orders increased in the electronics and home appliance sectors, with the sub-index for the electronics sector jumping by 1.94 points.

The composite sub-index for raw material purchasing prices dropped 1.92 points month on month to 49.61 in September, finally falling below 50. Copper prices fell sharply in September, snapping a five-month winning streak, as demand from end-users was sluggish, global central banks started to tighten monetary policies and Europe may face a second wave of COVID-19 cases.

The overall sub-index for raw materials inventories inched up 0.15 points to 49.78 in September, but still in contraction. Downstream users stepped up stockpiling ahead of the National Day/Mid-Autumn Festival holidays as copper prices declined, but tepid orders and concerns that copper prices overseas may fall sharply during the holidays deterred them from restocking in large amounts.

The overall sub-index for new export orders gained 0.58 point to 49.16 in September, rising for two consecutive months. Exports have improved significantly in the past few months as countries lifted coronavirus-related restrictions to resume businesses. The sub-indexes for new export orders in the home appliance and electronics sectors rose to 52.82 and 50.39 respectively.

In October, the purchasing managers’ index (PMI) across copper downstream sectors is likely to rise 0.68 point to 50.26, returning to expansion, SMM estimates. Overseas demand is expected to improve in October due to the upcoming Christmas holidays.

Copper downstream PMI

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