[Cu] CBI Survey - Operating Rates at Domestic Copper Rod & Wire Producers

SHANGHAI, May 12 (CBI China) -- A recent CBI survey of 25 major domestic medium-and-large copper rod and wire producers (total capacity: 2.92 million mt/yr) revealed the following insights:

    1) Operating Rates

    According to the CBI survey, the average operating rate at the 25 producers during May was 74.8%, up 7.9% compared to April, but down 0.9% YoY. Excluding four new additions to the survey group, operating rates at large producers were up 1.3%, and at medium producers up 1.6%.  Small producers’ rates were down 6.1%, and overall operating rates were up 0.9% on a monthly basis. As orders from downstream copper cable producers were less than expected, the increase in operating rates at copper rod producers slowed, with stable operating rates reported at medium and large producers, but declining operating rates at small producers. 

    2) Inventories

    The survey also revealed raw material inventories at the 25 copper rod producers experienced slight declines. Raw material inventories accounted for 11.1% of monthly copper consumption during March, down 2.2% MoM. Finished goods inventories accounted for 10.6%, up 1.2% MoM. As copper prices fluctuated at high levels after rebounding in early April, downstream copper consumers were pessimistic toward copper prices, dampening buying sentiment and causing raw material inventories to decline slightly. These downstream producers will keep raw material inventories low as long as market sentiment is uncertain. In addition, some copper rod producers say finished goods inventories increased during May due to a slowdown in downstream orders, possibly creating additional sales pressure in the future.

    3) Scrap Copper

    The ratio between refined and scrap copper at the 25 producers rose to 35.8 to 1, up 30% MoM. Producers said since copper rod with scrap copper as raw material is mainly used for construction, orders for this kind of copper rod plunged due to declines in housing starts. Demand for cooper rod was also mainly from electric power generation and other large-scale projects, and these types of cables use refined copper rod as raw materials due to high quality requirements. This disparity in industry demand is the major reason for the increasing ratio, despite of the widening price gap between scrap and refined copper.

    4) Forecast of Copper Prices

    According to the survey, 52% of producers believe copper price will fluctuate in the foreseeable future. They said there was no significant improvement in current market fundamentals, leaving no rebound momentum to copper price. However, any downward room for copper price will be limited after previous several rounds of corrections, so SHFE copper price will move around RMB 40,000/mt slightly. 28% of producers believe copper price will slip. They said the recent arrivals of imported copper at port and the eased scrap copper supply will exert some supply pressure in the market in the short term, and the weak spot consumption will remain unchanged. In this context, SHFE copper will likely dip to RMB 37,000/mt. 16% of producers predict copper price will climb up for several reasons. First, short supply will remain in the market, and copper price is expected to experience a round of strong rise in mid-May. Second, the effect of off-peak season will likely be better than past year, so the pressure on copper price will be relatively limited. Third, current price will still have large upward room compared to previous high price level. They believe copper price will rise to the range of RMB 40,000-48,000/mt. The remaining 4% of producers were uncertain about the copper price.

Copyright ? 2009, CBI (Shanghai) Co., Ltd. All Rights Reserved.

None of this material may be used for any commercial or public use in any form or means, without the prior written consent of CBI China. For reproduction issue, please contact us by email: metalresearch@cbichina.com or tel:86-21-51550040