Q4: How Are Copper Downstream Enterprises Faring? [SMM Analysis]

As the weather gradually turns colder in Q4, how are copper downstream enterprises operating? The SMM survey team investigated downstream-related industries, including power construction, infrastructure, and real estate development. The summary of each industry is as follows:

Enterprise A (Power Construction): Currently, there are still ongoing projects, but overall construction efficiency has declined due to the cold weather. There are no new projects in the pipeline, and recently, material prices have been relatively high, so the company is mainly maintaining just-in-time procurement.

Enterprise B (Power Construction): Several projects have been completed in the past two months, with work focused on this area. New projects will be undertaken in the coming months, and the overall outlook is optimistic.

Enterprise C (Infrastructure): The situation in October continued, with a significant gap compared to previous years in H2. Even the outlook for next year is not promising. Currently, old projects are still being advanced, with no new projects or completions. No major changes are expected in the next three months, and future development will depend on the situation.

Enterprise D (Infrastructure): Considering winter stockpiling, there have been no major changes in projects recently, and no new projects are expected before year-end. Ongoing projects include those in Sichuan, where the financial situation is relatively good. Sichuan may become a key focus for western development, and more attention will be paid to Sichuan projects in the future. Financially, only the completion of old projects might secure some funds by year-end, but many completion projects still have unsettled funds. The current policy mainly aims to stabilize the economy by reducing interest rates to alleviate financial pressure. However, boosting consumption and new projects remains weak, and the situation next year may not improve.

Enterprise E (Infrastructure): Project progress is slow, and there is a lack of new projects. After the completion of existing projects, steel usage has decreased. Financially, the situation is also tight, and project bidding is highly competitive, with costs being disregarded to secure new projects. The outlook for next year is not optimistic, with funding problems being crucial. Financial relief might bring some improvement.

Enterprise F (Infrastructure): Projects have started, but outsourcing has led to losses. The company currently has few project managers and no new projects. The focus before year-end is on one project and urging payments for previous projects.

Enterprise G (Real Estate Development): There are few recent projects with no new progress, and old projects are being handled without plans to acquire new land. The industry environment is poor, and no significant changes are expected in the next three months, making new projects difficult to determine.

Enterprise H (Real Estate Development): Currently, there are five ongoing projects, with one in Hangzhou nearing completion and the remaining four to be completed next year. There are no new projects, and it appears that there will be no significant increase in projects next year. As year-end approaches, funds are tight, and the Hangzhou project will start settlement.

Enterprise I (Real Estate Development): Projects are relatively stable, but construction speed is slow, especially for projects nearing completion. The current policy of interest rate cuts has limited assistance, and sales have not significantly improved. There are 5-6 ongoing projects with no plans to acquire new land. The outlook for next year is uncertain, with severe layoffs in the industry. Although the company has not laid off employees, funds are very tight.

According to the survey results, many domestic power construction and infrastructure enterprises are facing declining construction efficiency, a lack of new projects, and high material prices. Real estate development enterprises are also facing slow project progress, tight funds, and no significant improvement in sales under the poor industry environment. The pressure of layoffs within various industries is also gradually increasing, and the overall operation of enterprises is not optimistic.

Meanwhile, due to the cold weather, the wire and cable industry is gradually entering the traditional off-season. According to the latest SMM survey data, the operating rate of domestic copper wire and cable enterprises in October unexpectedly declined, and the operating rate is expected to continue to decline in November.

Looking ahead, with the gradual implementation of policies such as the western development, some infrastructure enterprises are optimistic and will pay more attention to project opportunities in south-west China. According to the latest customs data, from January to October this year, the total import and export value through the new western land-sea corridor reached 1.15 trillion yuan, up 8.8% YoY. The new western land-sea corridor continues to play a significant role in foreign trade.

However, funding problems remain a key issue hindering enterprise development. Many enterprises report that there are still many old projects with unpaid funds, and tight funds have become a bottleneck restricting enterprise development. Enterprises indicate that only effective financial relief can improve the industry.

In summary, the current situation in various copper downstream industries remains severe. Although some enterprises are hopeful for new project opportunities brought by the western development, most enterprises expect that due to the tight funds caused by year-end payment issues, the overall situation this year is unlikely to improve significantly. SMM will continue to monitor the market situation.