China copper downstream activity grows slower than expected in Apr

SHANGHAI, May 5 (SMM) – Activity expansion across major copper downstream industries in China fell short of expectations in April, as end-market demand were not as strong as previously hoped.

SMM's purchasing managers' index (PMI) across China’s construction, power, electronics, transportation and home appliance sectors, major consumers of copper, released on April 30, fell to 52.14 for April, down from 56.03 in March.

A reading above 50 indicates expansion while one below 50 signals contraction. SMM had expected the index to rise to 57.58 in April.

The value-added tax cut for the manufacturing sector took effect from April. This drove end-users to rush to place orders in late March to chase VAT invoices at the rate of 16%, and hampered the growth of new orders in April. The sub-index for new orders dropped 7.02 month on month to 51.21.

Official data showed that realised investment in power grid projects declined 23.5% year on year in the first three months of 2019. However, orders from solar power, offshore wind power and ultra-high voltage projects remained high.

Production across copper downstream industries also grew slower last month, with the sub-index slipping 2.78 to stand at 53.15.

Large firms maintained stable and high-speed production while the government’s recent supportive policies that target small firms helped such plants gradually step up operation.

End-market consumption recovery failed to meet forecasts for a peak-season level in April, and this weighed on prices of futures. With limited buying interest among downstream buyers, spot copper markets saw poor trades last month, and spot spreads declined.

The sub-index for purchasing prices of raw materials across downstream copper sectors dipped 0.43 to stand at 48.5 in April.

Despite lower prices, moderate growth of new orders kept firms cautious about purchasing raw materials. The sub-index for raw material stocks fell 4.19 to 49.75 last month.

The PMIs for the construction, power, electronics, transportation and home appliance sectors all stood above 50 in April, as production held stable and as new orders saw a smaller increase.