SHANGHAI, Sep 14 (SMM) - According to SMM data, the average operating rate of copper cathode rod producers rose 0.07 percentage point on the month and dropped 0.56 percentage point on the year to 74.44% in August. The average operating rate across large, medium-sized and small enterprises was 78.28%, 68.28% and 64.82% respectively. (Notes: SMM surveyed 53 producers with a total production capacity of 12.87 million mt.)
The average operating rate of copper cathode rod producers only gained 0.07 percentage point MoM in August, which was lower than expected. On the one hand, the pandemic in Jiangxi weighed on the production and sales of copper cathode rod enterprises, dragging down the average operating rate. On the other hand, the spot premium of copper cathode in south China remained high in the second half of August, and many local copper cathode rod enterprises reduced or suspended the production, hence the sluggish production resulted in a decline in output. In addition, power rationing across east China in August restricted the production in some copper cathode rod enterprises in Anhui and Zhejiang, where the output declined and the operating rates also fell.
Although the average operating rate in August fell short of expectation, it still stood at the similar level of the same period in previous years. SMM survey indicated that driven by the rising demand from the wire and cable sector, copper cathode rod enterprises have seen a significant increase in orders since late June. With sufficient orders, enterprises virtually maintained full production in August, and the operating rates of most enterprises steadily moved up. Furthermore, the secondary copper rod producers were still constrained by the tight supply and high prices of raw materials. Given that secondary copper rods were less favoured with low economic benefits, the consumption of copper cathode rods was further boosted.
Overall, multiple negative factors in August including pandemic, power rationing and high premiums dragged down the operating rates of the copper cathode rod producers. But thanks to the improvement in wire and cable demand and the continued poor substitution effect of secondary copper rods, the average operating rate of copper cathode rod producers still recorded a slight increase.
Raw material inventory/output ratio stood at 6.61% in August
Raw material inventory/output ratio of copper cathode rod enterprises was 6.61% in August, down 0.54 percentage point from the previous month. Although the raw material inventory of some copper cathode rod enterprises stayed low due to the pandemic and high premiums, most enterprises had sufficient orders and maintained full production. Raw materials were mainly purchased as needed, and the raw material inventory/output ratio was at a normal level.
Average operating rate of copper cathode rod enterprises is estimated at 77.16% in September
The average operating rate of copper cathode rod producers in September is expected to rise by 2.72 percentage points month-on-month and 5.33 percentage points year-on-year to 77.16%. Judging from SMM survey, the pandemic in Jiangxi is gradually eased, thus its negative influence on copper cathode rod enterprises will gradually subside. At the same time, other adverse factors such as power rationing and high premiums will also fade. Therefore, the operating rates of copper cathode rod enterprises are expected to show an upward trend amid the high expectations for consumption during the September-October peak season. Still, it is necessary to stay alert to the disruption caused by the domestic pandemic. At the same time, the copper prices rose in early September, which constrained the downstream consumption lightly. The copper cathode rod enterprises did have received relatively sufficient orders, but if the price difference between copper cathode rods and secondary copper rods are expanded, or new orders declined constantly, then the growth in the operating rates of copper cathode rod enterprises is bound to be restricted.
