June Copper End-User Production Feedback - Construction Sector [SMM Analysis]

2024 is already halfway through. In H1, copper prices surged to a historical high of 89,130 yuan/mt, significantly inhibiting downstream consumption, especially in the wire and cable industry where orders remained sluggish. In June, many regions experienced drought, high temperatures, and heavy rainfall. Did these weather conditions impact the construction and infrastructure sector? How have recent infrastructure projects performed? The latest findings from the SMM survey team are summarized as follows:

Producer A (Construction Sector): This year, infrastructure projects are shifted from East China to West China. For example, there are many new wind power projects in the West. Additionally, funding problems have not been resolved. There are fewer national-level projects this year, with the government favoring livelihood projects such as schools and water conservancy. New projects have significantly decreased this year. Currently, the infrastructure sector remains stable with existing projects proceeding as usual.

Producer B (Construction Sector): The number of construction projects this year is less than last year, with many requirements and tight funding. There are many requirements for undertaking projects. For instance, after bidding, the client may require price adjustments based on the bid price, awarding the contract to the bidder with the lowest price. Pre-financing and delayed payments are also common. Additionally, we are cautious in undertaking local government projects (due to tight government funds, construction units need to bear the financial burden, so we reduce the undertaking of government projects). Recent heavy rainfalls have significantly impacted ongoing projects, slowing down construction speed, but progress can still be ensured. There are not many new projects in H2, with limited project undertakings.

Producer C (Construction Sector): The sluggish market led to continuous delays in real estate projects, which are estimated to start in August.

Producer D (Construction Sector): There were no new orders in June. On one hand, it is due to the off-season impact; on the other hand, the high temperatures in North China this year have increased, with temperatures in Shanxi reaching over 30 degrees Celsius, affecting construction progress. Additionally, the poor industry environment made it difficult to secure ideal orders.

Producer E (Construction Sector): The project in Guizhou is in its final stages, but progress has been slow due to heavy rainfall, causing delays. The payment for the first phase of the project in Guangzhou is not satisfactory, which may lead to some uncertainties in the second phase, and negotiations are underway. It is estimated that short-term weather impacts will still be significant.

Overall, due to the poor market environment, real estate and infrastructure projects remain in a sluggish state. Tight funding, high temperatures, and heavy rainfall have also impacted new project commencements and construction progress. SMM will continue to pay attention to market conditions and bring you the latest updates.