High copper prices suppress purchase willingness; contradiction between operating rate and inventory of copper wire and cable intensifies in June [SMM analysis]

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       According to SMM, the operating rate of domestic copper wire and cable enterprises was 72.41% in June this year, down 9.27 percentage points MoM and up 0.76 percentage points YoY, falling short of expectations by 5.06 percentage points. Among them, the operating rate of large enterprises was 76.99%, that of medium-sized enterprises was 56.36%, and that of small enterprises was 45.97%.

       Specifically, the operating rate of the copper wire and cable industry in June showed a MoM decline and a slight YoY increase. After copper prices pulled back from highs in June last year, the operating rate slowly rebounded. However, after April this year, copper prices continued to rise, leading to a gradual decline in the operating rate, with the YoY increase narrowing to 0.76 percentage points. Most enterprises reported that new orders decreased MoM this month, making it difficult to maintain the operating rate. Observing by industry, the new energy industry still provided support, but the continued downturn in the construction industry still suppressed the overall operating rate of the industry. Meanwhile, the continued high operation of copper prices further suppressed downstream purchase willingness, exacerbating the decline in the operating rate.

       From the perspective of copper wire and cable inventories, the raw material inventory of SMM copper wire and cable sample enterprises was recorded at 44,275 mt in June, down 3.32% MoM, with a raw material inventory/output ratio of 20.14%, up 1.6 percentage points MoM. Finished product inventories were recorded at 50,390 mt, up 7.52% MoM, with a finished product inventory/output ratio of 22.93%, up 0.87 percentage points MoM. The raw material inventory was suppressed by the continued high operation of copper prices, which inhibited enterprises' purchase willingness. The main reason for the accumulation of finished product inventories was the insufficient cargo pick-up momentum of downstream enterprises due to funding constraints, leading to a decrease in end-use demand. The current inventory situation reflects that the industry is simultaneously under the dual squeeze of price pressure from the raw material side and demand contraction from the consumption side.

       According to SMM's forecast, the operating rate of the copper wire and cable industry in July is expected to decline by 0.43 percentage points MoM to 71.98%, down 0.96 percentage points YoY. The main factors include the continued weakness of end-use demand, the lack of support from new demand, and the continued suppression of downstream purchase willingness by the surge in copper prices. Observing by industry, orders in the power grid and new energy sectors are expected to remain relatively stable, but demand in the construction industry continues to be sluggish with no signs of recovery. Overall, the operating rate of the copper wire and cable industry in July will show a slight downward trend.