Recovering demand lifts operating rates across wire, cable producers in May

SHANGHAI, Jun 3 (SMM) – Chinese manufacturers of wires and cables stepped up their operations in May as demand improved, especially orders from offshore wind turbine, solar power, ultra-high voltage, high-voltage projects.

The latest SMM survey showed that the average operating rate across Chinese wire and cable producers rose 4.25 percentage points from April to stand at 92.06% in May, up 1.07 percentage points from May 2018.

Housing and subway construction grew demand for medium- and low-voltage wires and cables last month, while the push for 5G networks construction bolstered demand for communication wires and cables.

Power investment, however, was disappointing, with the China Electricity Council reporting that realised investment in power grid projects in the first four months of 2019 dropped 19.1% year on year to stand at 80.3 billion yuan.

Producers told SMM that most of recent deliveries were for orders placed in the second half of last year. Demand from medium- and low-voltage power projects grew slowly this year.

Wire and cable demand flowed to large and medium-sized producers as buyers chased quality after the Xi’an Aokai scandal in March 2017. This led to the year-over-year increase in the operating rates across wire and cable producers in May, as most samples included in the SMM survey are large or medium-sized.

Excluding improved industrial concentration, operations across wire and cable producers were weaker than the same period last year.

The ratio of raw materials inventories to monthly output at Chinese wire and cable producers stood at 25.22% in May, up 2.58 percentage points from April, as greater orders and lower Shanghai copper prices drove producers to stockpile. Continued tightness in cash flows, however, kept them cautious about procurement.

The average operating rate across Chinese wire and cable producers is expected to inch down 0.12 percentage point month on month to 91.95% in June, up 8.51 percentage points year on year.

Poor year-to-date investment in power grid projects raised pessimism about consumption of wires and cables in the remainder of this year, even if investment substantially expands in the third quarter.