Average Operating Rate Up to 77.23% in July at Chinese Domestic Wire Rod Producers

A recent SMM survey of 21 Chinese major domestic wire rod producers (total capacity: 3.76 million mt) revealed that the Average Operating Rate Up to 77.23% in July with Raw material inventories down to 14.44% of production during July.

The average operating rate at the surveyed producers was 77.23% in July, up 1.59% MoM, and up 2.92% YoY. The rate in July was the highest monthly average so far this year, but mainly due to a single company in the survey restarting production at one idled production line. Excluding this company, the average operating rate for July was 75.70%, basically flat at June's level. Most consumption of wire rod during July was from electric wire and cable manufactures since consumers of enameled wire, automobile wires, and electronic wire were all beginning their seasonal low demand period. Some producers which were awarded contracts for new or ongoing railway projects, however, were able to increase production in order to deliver goods on schedule.

Railway construction has stagnated since 2H 2011, and included few new projects or a slowing of projects now under construction. A lack of new projects will cause demand for copper to fall in the short term following the most recent deliveries. Chinese Premier Li earlier pointed out the importance of railway investment during the executive meeting of the State Council, proposing to prioritize railway construction in central and west China, as well as selected poorer regions. Market rumors say nine new railway projects will be added this year, but any positive impact will not be felt in the near term. SMM expects the average operating rate to fall slightly in August to 76.21% due to tight liquidity. 

Raw material inventories were down to 14.44% of production during July. No significant improvement in cash liquidity in July and difficulties in obtaining loans added to cash flow pressures at producers. These difficulties were compounded by soft demand due to prices, causing raw material stocks at producers to fall. 

source from wireworld