Excess Production Capacity Squeezes Profits of Brass Strip Enterprises

Between 2003 and 2006, under the backdrop of rapid growth of domestic demand for brass strip and soaring copper price, brass strip manufacturers made a fortune. And brass strip manufacturers mushroomed in Zhejiang, Anhui and Jiangsu. Large brass strip manufacturers jostled each other to contend for a larger production scale and newly-built projects launched successively. Besides, some large brass strip manufacturers expanded their production capacity by going public. For example, Ningbo Xingye Copper was successfully traded in the Stock Exchange of Hong Kong Limited in December 2007, while Jingcheng Copper also got listed on Shenzhen Stock Exchange in September 2007. The year of 2007 can be called the heyday of the brass strip industry. However, in the years following 2007, hit by the international financial crisis, European debt crisis and declining demands at home and abroad, the brass strip industry gradually entered a period of oversupply. Apart from the sluggish demands in the external market, the domestic demand is also shrinking as a result of severe inflation. Therefore, downstream enterprises including electronics factory and hardware factory are very sensitive to copper strip price.High copper price will directly impair enthusiasm of downstream enterprises such as electronics factory and hardware factory to prepare materials. We learnt that, in the second half of the previous year, the economic sluggishness of the western world has transferred to domestic processing enterprises. China’s brass strip enterprises have to face a series of problems such as low operating rate, high copper inventory and capital chain rupture, etc. Due to operating rate insufficiency, some small and medium copper strip enterprises operate with a mentality of “counting itself a winner for having cut losses” and constantly drive down copper strip processing fee. This year, we plan to emphatically enhance basic management level of enterprises in an all-around way, lower production cost through acceleration of technical innovation, strengthen risk control, especially, prevent risks of various speculations and strictly control inventory of copper and raw materials.