Mysteel Monthly: Copper tube demand declined

Copper tube price fell to the bottom in Jul and recovered in Aug. in Zhejiang market, mainstream brand copper tube price was Yuan 67,600/t on 31 Aug, +Yuan 1,300/t (+1.92%) compared with early Aug. Price rise in short term can stimulate end-users' wiliness to restock. However, end-users demand declined in year basis and remained low raw material inventory on the consideration of cost and cash flow. From the market feedback, end-users hold bearish sentiment on the market and think copper price will decline in the future.

Data Source: Mysteel

According to Mysteel survey on 38 copper tube companies, Jul China copper tube production was 120.5kt, -1.07% MoM, -7.9% YoY. Utilization rate was 63.5% vs. Jun 65.3%. The utilization rate for big enterprise was 73.9%, -4.65% MoM. Big tube companies mainly receive long-term orders and air-conditioner customers demand was under off-peak season, thus utilization rate declined. The utilization rate for middle companies was 67.7% in Jul and 49% for small producers, who mainly receive short-term orders and recoup funds for the first purpose.

Data Source: Mysteel

Data Source: Mysteel

End-users' willingness to restock maintained low: Orders above 30 tons fell -4.5% MoM and orders around 10 tons fell -3.8% MoM. From the market side, orders of big copper tube producers were better than middle and small ones. There are three main reasons for the lackluster orders: first, the price of raw materials fluctuates frequently, and the cost fluctuation makes manufacturers' purchasing enthusiasm general; Second, the market is transparent. Traders played short-term games and refrigeration enterprises purchased relatively cautious; Third, the market was in traditional off-peak season and manufacturers relied on long-term contract.

China air-conditioner production in Aug planned to be 10.15 million tonnes, -19.98% compared with Jul actual output. The decline trend of air-con production plan has eased in Aug as sales of tier 2-3 brands improved on high temperature and consequently increased production plan. From the beginning of the year, supportive policies for home appliances carried out and copper price declined significantly but Aug air conditioner production plan still fell on yearly basis. Thus, copper tube companies held cautious attitude to increase production. Copper consumption in air conditioner in 1H 2022 estimated to fall 20-30% YoY and demand is still fatigued. In short term, copper consumption is expected to remain weak.

Data Source: Mysteel   

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