Apr operating rates at producers of copper cathode-made rods decline over 5 percentage points on year

SHANGHAI, May 20 (SMM) – The average operating rates across Chinese manufacturers that produce copper rods with copper cathode as feedstock came in at 78.28% in April, up 1.1 percentage points from March but down 5.43 percentage points from April 2018, showed an SMM survey.

April’s rate fell year on year as this year’s consumption recovery underperformed last year. Official data showed that realised investment in grid power projects in China in the first three months of 2019 dropped 23.5% from a year ago to stand at 50.2 billion yuan. Some firms reported relatively poor demand for magnet wires or automotive wires and cables.

Compared to March, the operating rate gained as consumption is recovering and as narrower copper scrap price spreads drove consumers to copper cathode. We saw strong demand from solar, offshore wind power and ultra-high voltage projects. The discount of copper scrap against copper cathode averaged 1,088 yuan/mt in April.

The month-on-month growth in operating rates was also bolstered by improved industrial concentration, which drove orders to flow from small producers to larger ones. Most plants included in the SMM survey are large or medium-sized.

The ratio of raw materials inventory to monthly output at copper cathode-made rod producers stood at 11.5% in April, down 1.17 percentage points from the previous month.

The average operating rate is expected to climb 4.06 percentage points month on month to 82.32% in May, as low copper scrap spreads drive more producers to copper cathode and given seasonality factors.