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Novel Coronavirus Pneumonia’s Impacts on Copper Industry, Replied Measures and Suggestions
February 13 2020 10:28:47Nonferrous Industry Association(Linda)

The Copper Industry Department of China Nonferrous Metal Processing Industry Association (hereinafter referred to as ‘processing association’) made a systematic analysis on the impact of the epidemic on the production and operation of enterprises through questionnaire and telephone survey, and put forward suggestions on how to take correct measures to actively respond to reduce losses. The details are as follows:

 

1. Impact of the epidemic on current production and operation of enterprises

(1) Insufficient staffs

Delay of returning to work. According to the requirements of epidemic prevention and control, most copper processing enterprises will start work around February 10, which is about 10 days later than the original plan before the Spring Festival. Even if the start-up is allowed, it is expected that the normal production of enterprises will be in April.

The operating rate is insufficient. There is a shortage of front-line production workers and technicians, which leads to a low order fulfillment rate, especially in areas with severe epidemic and developed economy. There are different degrees of traffic difficulties for employees to return to the factory, and they need to be isolated for 7-14 days after returning to the factory.

The cost of wages has increased. The delay of work and the payment of basic wage also increase the cost. It is estimated that the labor cost of the enterprise will increase by at least 20% in February.

According to the survey of more than 20 key copper processing enterprises, the impact of the epidemic on the production and sales of large-scale copper processing enterprises in February is about 60-75% (50% of which are affected by the start-up time and personnel, 10-25% of which are affected by the epidemic), and the impact is expected to be 15% - 25% in March.

(2) Difficulties in logistics and transportation

At present, there are great difficulties in logistics transportation. Each province or region has a strict access system, which has an impact on product order delivery, raw material supply, import and export trade.

Product inventory backlog. There is a large backlog of products in transit and in stock before the festival.

Orders are difficult to deliver. Strict transportation access system in each province leads to the failure of delivery of ordered products. At the same time, raw and auxiliary materials cannot enter the factory to arrange production normally.

Insufficient downstream orders. Downstream customers did not resume production, resulting in the basic stagnation of order sales, order delivery is also expected to be delayed.

The import and export trade is blocked.

(3) Cash flow challenges

Cash flow can only be maintained in the short term. Some businesses can only maintain cash flow for a few weeks.

Banks are reluctant to lend money. The bank credit is highly strained. In response to the epidemic, the demand for funds of enterprises has increased.

(4) Other problems

Copper prices fell as inventories fell. In response to the peak market demand season after the Spring Festival, many enterprises have stored a large number of raw materials such as electrolytic copper and recycled copper before the Spring Festival, while increasing the reserves of finished products. Since the outbreak of the epidemic, copper prices have dropped significantly, and inventory impairment is large.

Epidemic prevention goods are in short supply. Enterprises generally lack masks and disinfectant.

 

2. Industry’s basic situation is still good, downstream demand has not changed

Although the production and operation of enterprises are affected in the short term in February, in the long term, the industry fundamentals have not changed, and the recovery of market order and downstream demand is only delayed for a few weeks. It is optimistic that the market fundamentals in non-severe-epidemic areas will recover as soon as March and April. It is hoped that copper processing enterprises can make all-round preparations, respond to the call of the government and successfully pass the test of the epidemic.

(1) Build up confidence to get out of the predicament

The impact of the epidemic on China's economy is temporary, and the fundamentals of China's long-term good and high-quality economic growth remain unchanged. The non-ferrous metal processing industry is a sunrise industry that provides important materials for all aspects of the national economy. At present, the production capacity is in the downstream market.

(2) Downstream demand is still strong

The demand fundamentals of power, automobile, air conditioning, electronics, 5G and other consumer areas have not changed. The overall market demand is only postponed, and the situation will recover after the outbreak.

(3) The government’s measures to stimulate demand

At present, the state has issued some supportive policies. For example, on February 1, the central bank and other five departments issued a notice to clarify that if it is difficult for enterprises seriously affected by the epidemic to repay at maturity, they can be extended or renewed. We will support relevant enterprises to overcome the impact of the epidemic by appropriately reducing loan interest rates, increasing credit loans and medium - and long-term loans. On February 3, the people's Bank of China launched a 1.2 trillion RMB open market reverse repo operation to invest funds to ensure sufficient liquidity supply. The overall liquidity of the banking system was 900 billion RMB more than that of the same period last year. On February 5, the Ministry of commerce also issued a notice to organize qualified enterprises to return to work as soon as possible, and coordinate to solve the difficulties in returning to work. Local governments have also introduced measures to promote the development of enterprises. For example, Shanghai, Suzhou, Ningbo, Tongling, Yingtan, Wuxi and other places have introduced policies to support enterprises to overcome difficulties together. In the later stage, the state and local level may also introduce some policies conducive to the development of enterprises.

 

3. Suggestions for copper processing enterprises

(1) Epidemic prevention and control first

Attach great importance to the prevention and control of epidemic situation, put the physical health and life safety of employees first, understand the general situation and take into consideration the overall situation, cooperate with the local government to effectively implement the prevention and control measures, and do a table of social responsibility Rate.

(2) Boost employee morale

Scientifically demonstrate the harmfulness and severity of virus. Adopt positive measures and steady strategies, pay attention to it tactically, treat it realistically, strengthen positive energy publicity and education, eliminate fear, boost the market and inspire the people. Vaccines and targeted drugs are also being developed and will quickly win if they are successfully developed.

Assist the staff to get through the difficulties. To protect the health of employees in various forms.

(3) Remain abundant cash flow

In the current environment, it is the first thing to maintain sufficient cash flow. It is necessary to increase the supply and reduce the consumption. At the same time, strengthen online office, pay attention to communication with downstream and peers, and keep abreast of the industry trends.

(4) Logistics seeking recovery

According to the general requirements of national epidemic prevention and control, actively negotiate with the competent government departments on logistics and transportation issues.

(5) Futures hedging

The outbreak caused a sharp fall in copper prices, affecting the value of enterprise inventory. It shows that copper processing enterprises participating in futures hedging can effectively avoid the risk of copper price falling.

4. The work Processing Association will do

(1) Advice to the government

The member enterprises of the processing Association wish to put forward the following policy suggestions to the government:

Product logistics transportation and staff return to the factory isolation to facilitate. In terms of logistics and transportation, coordinate and guarantee the drivers and vehicles, implement the general purpose of one vehicle, one person, one card and one inspection (safety inspection), and ensure the smooth operation of the whole line of the upper and lower highways. On the aspect of employees' return to the factory, under the premise of safety, smooth the return channel, arrange local isolation after returning to the city, and reduce the double isolation time of the two places by half.

Introduce policies to support enterprises. Such as exemption or reduction of enterprise value-added tax, income tax and surcharges in stages; reduction of social security fees in stages; provision of stable post subsidies; provision of facilities for enterprise loans, such as loan capacity, loan amount, loan discount; reduction of electricity and natural gas charges, etc.

Stabilize the price of non-ferrous metals. It is hoped that the opening of futures market will be linked with the complete resumption of work of enterprises and will not be dragged down by the external market. It is suggested that the government should take measures to stimulate the development of non-ferrous metals in a good direction, so as to promote the popularity of electronic products, automobiles and 5G.

The processing association will report to the superior department according to the actual situation.

(2) Work for member enterprises

Keep in touch with the member enterprises at any time, accurately understand the production and operation conditions of the enterprises and the difficulties encountered, and timely make a voice on the relevant media of the industry, and work together with the enterprises to overcome the difficulties.

Give full play to the role of the association as a bridge link, timely report the difficulties and demands of copper processing enterprises to the relevant government departments, and keep the channels open.

Timely report the outstanding enterprises and individuals emerging from the epidemic in copper processing industry, and carry forward the patriotism of the copper processing industry.

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