Demand for copper rods in China has recently begun to be released, with the decline in copper prices and the approaching of the traditional consumption peak season in September-October.
According to Mysteel's survey, although some Chinese copper rod processing enterprises expect an increase in orders during the peak season, they also believe it is difficult to reach the same level as in the past few years. Moreover, the macroeconomic downturn brings intangible pressure to the confidence of market participants even though demand is more clearly stimulated when the copper price declines. It is expected that the overall output of Chinese copper rod processing enterprises will improve from September to October, but price competition will become fiercer.
The decline in copper prices has led to a significant narrowing of the price spread between refined and secondary copper rods, squeezing the price advantage of secondary copper rods, according to the survey. Therefore, the recent increase in orders received by Chinese refined copper rod processing enterprises is partly due to the original demand for secondary copper rods.
Although some enterprises are still optimistic about consumption in September-October, most market participants believe that consumption will weaken and decline year-on-year, similar to the situation in the first half of the year.
The growth in consumption of copper rods by the State Grid of China in the second half of the year was widely expected by market participants, mainly because consumption in this field was less reflected in the first half of the year. However, the substitution effect of aluminum alloy cables for copper cables is increasingly evident. In addition, fewer market participants are optimistic about the demand for the new energy industry, while slightly more people are optimistic about the recovery of the real estate industry.
On the other hand, there are still many copper rod processing enterprises that are not optimistic about the real estate industry because they believe that there are risks in the capital withdrawal of real estate companies. At the same time, the home appliance industry is also affected by this and not favored. Finally, processing enterprises and traders have pessimistic expectations for exports, believing that even in such a favorable exchange rate environment for exports, it is difficult for overseas demand to improve significantly.
There are 75,800 tonnes and 8,700 tonnes of orders of refined copper rods and secondary copper rods respectively in China that currently need to be delivered, according to Mysteel's survey of 15 refined copper rod processing enterprises and 10 secondary copper rod processing enterprises, with annual capacity of 4.2 million tonnes and 980,000 tonnes respectively. These orders may be an advance reflection of future orders, which will have an impact on market participants' confidence in the sustainability of demand.
Mysteel released a report with more details about this survey and these companies. If you would like to get the whole report and join this kind of on-site survey, please do not hesitate to contact us via. xuzhongping@mysteel.com
Written by Edenlis Huang, huangting@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com