[Cu] SMM Survey - Operating Rates at Copper Cable Producers Recover in September

SHANGHAI, Sept. 23 (SMM) -- A recent SMM survey of 20 major domestic copper cable producers (total capacity: 844 kt/yr) revealed the following insights:

    1) Operating Rates

    According to the survey, the average operating rate at the 20 producers was 83.6% in September, up 7.7% MoM, and up 14.4% YoY. Copper cable producers say September orders were up significantly compared to August levels, with grid construction, and other projects increasing demand, as well as from improved exports of downstream products. Most producers say orders should continue to grow, so operating rates are expected to remain high during October. 

    2) Inventories of Raw Materials

    The survey also revealed raw material inventories at the 20 copper cable producers, as a proportion of monthly copper consumption during September, was 24%, up 2% from August levels. Copper cable producers increased raw material inventories in response to rising orders. However, current raw material inventories are still not considered high given high copper prices.

    Most producers have plans to replenish stocks before China's National Day holiday in early October as a result of increasing downstream orders. However, a major difference between now and last year is the fact that copper prices fell significantly during last year's holiday. Most producers will build stocks based on existing orders, but stock replenishment appears to be more flexible this year, and price will drive the decision and timing of purchases.

    Copper prices were fluctuating at high levels recently, with downstream buying interest high when copper prices were around RMB 47,000/mt, but down sharply when prices reached RMB 50,000/mt. Actual stock replenishments before the holiday will depend on copper price trends, as well as downstream expectations with regard to copper prices after the holiday.

    3) Forecast for October Orders

    According to the survey, 50% of producers believe October orders will be flat with September levels, and most of them said orders in September have experienced growth from August, and the strong momentum for orders will continue during October, since they believe higher operating rates at downstream manufacturers contribute to growing orders in September.

    The remaining 50% of producers predict October orders will continue to increase. Although China's National Day holiday will have negative impact on copper cable output, orders will remain bullish, and a number of producers have operated at full capacity due to ample orders. A portion of produces even believe orders will maintain the upward momentum until the end of this year.

    4) Forecast for October Prices

    The survey reveals that 40% of produces were uncertain about October prices, so they kept raw material inventories low on an as-needed basis in order to minimize market risks.

    25% of producers predict copper prices will rise. They said the improvement in current orders signal the consumption has recovered, and the improved market fundamentals will help support copper prices to rise further. In addition, the recovery of macro economy will provide the upward room for copper prices as well.

    20% of producers believe copper prices will continue to fluctuate, since copper prices have fluctuated for a long time, indicating a shortage of upward momentum for copper prices, but the higher downstream purchasing interest when copper prices were lower, helping limit the downward room for copper prices.

    The remaining 15% of producers believe copper prices will likely face reduction for the foreseeable future, since the softened US dollar and rising stock markets have exerted limited positive impact on copper prices.

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