Aluminum Rod Operating Rate Hits New High for the Year, Price Spread Between Chinese and Overseas Markets Narrows Rapidly, Watch Out for Marginal Weakening of Demand [SMM Analysis]

Jun 23, 2026

According to SMM statistics, as of June 18, days of inventories at domestic aluminum rod plants stood at 1.82 days, down 0.84 days from the same period last week (2.66 days on June 12); the inventory ratio fell from 9.28% to 6.87%, a decline of 2.41 percentage points, and inventory levels have dropped to an extremely low range for the year. During the same period, the comprehensive operating rate of leading aluminum rod enterprises recorded 83.40%, up 1.3 percentage points WoW, climbing for the fourth consecutive week and hitting a new year-to-date high. The core driver behind the continued accelerated destocking is the sustained dual-line production schedule of orders for exported aluminum stranded wire and orders from State Grid, keeping aluminum rod supply tight; producers prioritized export and long-term contract deliveries, leading to a continuous contraction in spot circulation. The increase in operating rates was supported by ample order backlogs and high capacity utilization rates, with profits on orders on hand moderate enough to sustain high-load operations. Current inventory has approached an extreme low, leaving very limited room for further destocking, and is expected to enter a stabilization phase. Although the operating rate remains in an upward channel, considering that the capacity utilization rate is already at a high-level bottleneck, the room for further increase in the short term is expected to be relatively limited.

Last week, aluminum prices overall moved sideways and consolidated around 24,000 yuan/mt, without a significant directional breakout, and their marginal impact on processing fees was limited. However, this week aluminum prices have fallen continuously, while processing fees have remained firm. As of June 23, aluminum rod processing fees across regions diverged compared with last Tuesday: Shandong reported 600 yuan/mt, Inner Mongolia reported 550 yuan/mt, Henan reported 700 yuan/mt, Jiangsu reported 750 yuan/mt, Hebei reported 650 yuan/mt, and Guangdong reported 650 yuan/mt. Overall, processing fees stayed high and firm; in Shandong, processing fees have touched a high range for the same period in nearly three years, mainly due to the unchanged tight supply, with producers showing a strong willingness to hold prices firm and traders having scarce spot resources. Processing fees in Henan experienced catch-up gains, reflecting a phased release of downstream restocking demand in the region. Given that aluminum rod inventories have fallen to extremely low levels and the tight supply situation is difficult to reverse in the short term, processing fees are expected to remain high, but momentum for further gains is insufficient, and price spreads between regions may narrow further. Moreover, the speed of decline in LME aluminum prices has far exceeded expectations; currently, export profits for aluminum stranded wire have turned inverted, limiting the sustainability of orders. Caution is needed regarding a marginal weakening trend in market demand.

This week, the operating rate of China's aluminum wire and cable industry recorded 69.4%, up 0.8 percentage points WoW, continuing to run at high levels. During the week, the industry's operating rate continued to rise, with the dual-drive pattern of export orders and State Grid deliveries persisting. Enterprises steadily advanced production according to existing production schedules, and the overall capacity utilization rate remained in a high prosperity range. Currently, there has been no substantial change in the industry's operating logic. The resilience of export demand, combined with the medium-to-long-term order backlog from power grid tenders, jointly supported the industry's capacity utilization rate at a relatively strong range. Against the backdrop of coordinated domestic and external demand and relatively ample order reserves, the operating rate is expected to maintain high-level resilience in the short term.