Chen Dong: Demand improving, Copper rod market likely to recover in Q4
----Interview with Chen Dong, Deputy General Manager at Anhui Tianda Copper Co., Ltd.
Anhui Tianda Copper Corporation Limited is a company entirelyy owned by Anhui Tianda Group Co., Ltd., which seized the opportunity for industrial restructuring and upgrading, investing RMB 2 billion in the 150,000 metric-ton per year project to produce advanced electromagnetic wires. Tianda Group was established in 1975, and focuses on manufacturing products, such as plastics, special steel tubes and advanced copper products. Tianda Copper is mainly engaged in the production of 8.mm and 0.07mm copper rod and tin-copper wire.
Asian Metal: Mr Chen, thanks for agreeing to this interview. Could you please give us a brief introduction to your company’s main business activities?
Chen: Anhui Tianda Copper Co., Ltd is a subsidiary of Anhui Tianda Group, and we started to build the copper rod and wire project in Chuzhou in 2013. Our company is located in a central area with obvious distribution and transportation advantages. Anhui Tianda Group is a famous enterprise in Anhui, and we concentrate on manufacturing products, such as plastics, special steel tubes, advanced copper products, biotechnology products and so on.
We have introduced a continuous rolling and casting production line- Contirod from SMS Meer, Germany - and a twin wires Rod Breakdown machine from Niehoff, also from Germany. We are engaged in the production of copper rod with diameters of 8.0mm and 0.07mm, and the production capacity is 150,000tpy. The Niehoff production line came on stream in July 2014, and the current outputs are around 6,000t. The Contirod from SMS was put into production in June 2015, and produces low-oxygen copper rod with a diameter of 8.9mm. Our sales volume is around 3,000-4,000t.
Asian Metal: Copper rod capacity in China has been expanding in recent days, and the total capacity is surplus. Many new enterprises are running at low operating rates. Some new copper rod projects with a total capacity of about 1.5 million tonnes will come on stream in the remainder of this year, and your company’s copper rod project was put into production this year. What do you think about this problem?
Chen: Many industries and enterprises are facing problems of surplus capacity, with the exception of some new industries using high technology. Under these circumstances, copper rod producers should think about how to react and achieve a breakthrough. Our company is continually enhancing our quality and is paying more attention to consumers from the data cable and enameled wire industries and so on.
Between 2010-2015, copper rod capacity in China has been on the rise, and Chinese enterprises are no longer importing copper rod equipment this year. Nevertheless, new capacity has gradually been coming into operation, and consumers are continually upping their requirements. You’ll also find some copper rod production line sand upcasting equipment in China have been phased out. Therefore, we believe the market may become more balanced.
On the whole, Tianda Copper is introducing more advanced and perfected test methods, and we have good risk management and production cost management systems. Therefore, we are confident about our future.
Asian Metal：Currently, the copper rod industry in China has many problems, like low profits, much capital and so on, with most producers only able to generate meager profits. How does your company resolve these problems?
Chen: Impacted by the abundant supply and macroeconomic environment, the copper rod industry is witnessing low profits, but the problems will improve after the outdated capacity is phased out over time. Copper prices are relatively high, and copper rod producers need to have sufficientraw material inventories and copper rod stocks. Therefore, almost all copper rod producers face problems like high financial costs, which are also a barrier on entering the copper rod industry, and some small and mid-sized enterprises are having difficulties.
The main executives at Tianda Copper come from the Group, and we will utilizee copper’s financial nature and control production costs. We will fulfill the profit targets set by the Group and develop the company well. Although Tianda Copper is a newcomer in the copper rod industry, we have a good relationship with the banks which ensures the capacity is supplied, and use futures to minimize the risks.
Asian Metal:Although copper prices were on the decline and demand remained slack, China’s main copper rod producers’ operating rates kept risingin Q2. What do you think about this?
Chen: During the National Day holiday, China’s PMI data for September increased month-on-month, indicating that China’s manufacturing industry had begun to stabilize. It meant China’sstimulus package had arrested the downward slide, with the government achieving the 7% GDP target. In addition, it is said that the State Grid’s investment on the power grid was greater than in Q1 and Q2. Meanwhile, the home appliance industry started to warm up, which was favorable for the copper rod industry.
Asian Metal:Copper prices in London and Shanghai increased sharply in October, and the copper rod market slowed down in China. Will copper rod demand in China continue to improve in Q4?
Chen: After the National Day holiday, copper prices rebounded, supported by the surge in Glencore stock and some enterprises cutting production. In addition, recovering copper demand also offered support for copper prices. We understand most copper rod enterprises were out of production, so the market slowed down in the first half of October. In Q4, the home appliance industry will enter peak season, and copper rod demand may become better than in the first three quarters.
Asian Metal:On 1 Jan 2015, China started to adopt 9% export rebates for copper bar, copper rod and so on. However, Chinese copper rod producers haven’t benefited from this, and exports remain at a low level. Does your company have any plans to export the material in the future?
Chen: Take China’s copper rod exports to Southeast Asia for example: the export cost for copper rod is around RMB500/t. Although China has adopted the 9% export rebate policy, copper rod producers also need to be concerned about the input and output VAT, changes in RMB exchange rates and the copper price ratio between London and Shanghai. Currently, we are paying close attention to the situation and will export the material if available.
Asian Metal:Although China’s government has taken numerous measures to stimulate the economy, spot copper prices have fluctuated at low levels this year and lack the momentum to rise. What do you think about the direction of copper pricesin Q4?
Chen: I think copper prices may climb in the short term on the back of seasonal demand and some producers cutting outputs. In the spot market, the LME copper inventory has fallen to 284,000t, the lowest level for seven months. However, the prices are likely to be weak in the long term. Copper demand may not improve significantly, and the supply remains abundant. We think copper prices may become relatively stable and fluctuate within a narrow range.
