SHANGHAI, Feb 1 (SMM) – Activity across major copper downstream industries contracted in January as end-market consumption slackened ahead of Chinese New Year.
SMM's purchasing managers' index (PMI) across China’s construction, power, electronics, transportation and home appliance sectors, major consumers of copper, released on Friday February 1, fell to 48.43 for January, down from 50.14 in December. A reading above 50 indicates expansion while one below 50 signals contraction.
December was the only month for the copper downstream PMI to stand above the boom-bust line in the last eight months.
Some copper end-users suspended from the second half of January to brace for the festival which is scheduled in early February this year. The production sub-index dropped 6.05 month on month to 44.06 last month.
While the home appliance sector operated in high gear to stockpile for post-holiday demand, production across the power sector slowed as seasonal factors weakened demand. Most construction sites suspended for poor weather.
New orders expanded last month, with the sub-index up 0.13 to 50.24 as the long cycle of order fulfillment prompted power grid enterprises to place orders ahead of the holiday. Most firms would resume operation from the middle of February and this improved new orders.
The sub-index for new export orders, however, fell into deep contraction terrain last month.
Weakened US dollar, dragged by the Fed’s dovish stance on rising interest rates, a slew of stimulus measures announced by the Chinese government and a solid rally in oil prices, bolstered copper prices in January. The sub-index for purchasing prices of raw materials across downstream copper sectors gained 1.55 from a month earlier to stand at 50.99.
The sub-index for raw material stocks slipped 4.42 month on month to 46.77 in January. Inventory costs and uncertainties about post-holiday consumption kept firms cautious about stockpiling raw materials ahead of the CNY break. This year’s stockpiling activity was less brisk than previous years.
