Aluminum Rod Output Hits Yearly High, But Market Cautious on Demand Amid Narrowing Price Spread[SMM Analysis]

June 23, 2026

According to SMM statistics, as of June 18, days of in-factory inventories of aluminum rod in China was 1.82 days, down 0.84 days WoW from 2.66 days on June 12. The inventory ratio fell to 6.87% from 9.28%, down 2.41 percentage points, with inventory levels dropping to an extremely low range for this year. Over the same period, the aggregate operating rate of industry leaders in aluminum rod was 83.40%, up 1.3 percentage points WoW, climbing for the fourth consecutive week and hitting a new high for the year. The core logic behind the sustained and accelerating inventory destocking is the continuation of dual-line production schedules for export aluminum stranded wire orders and orders from State Grid, keeping aluminum rod supply tight. Producers prioritized export and long-term contract deliveries, while spot circulation continued to contract. The pick-up in operating rates was supported by ample order backlogs and high capacity utilization rate, with profits from orders on hand sufficient to sustain high-load operations. With inventories now near their minimum threshold, room for further destocking is extremely limited, and they are expected to stabilize. Although the operating rate remains in an uptrend, given that the capacity utilization rate is already at a high-level bottleneck, further upside room is expected to be relatively limited in the near term.

Last week, overall aluminum prices moved sideways around 24,000 yuan/mt, without any notable directional breakthrough, leaving limited marginal impact on processing fees. This week, however, aluminum prices dropped successively, while processing fees held firm. As of June 23, aluminum rod processing fees across regions showed divergence from last Tuesday's levels: Shandong was at 600 yuan/mt, Inner Mongolia at 550 yuan/mt, Henan at 700 yuan/mt, Jiangsu at 750 yuan/mt, Hebei at 650 yuan/mt, and Guangdong at 650 yuan/mt. Overall processing fees stayed high and firm, with Shandong's level reaching the high range for the same period in the past three years, mainly because the tight supply situation remained unchanged, producers showed strong willingness to hold prices firm, and spot cargo among traders was scarce. Processing fees in Henan caught up, 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 unlikely to reverse in the short term, processing fees are expected to fluctuate at highs, though momentum for further increases is insufficient, and regional price spreads may further narrow. Moreover, the current pace of the LME aluminum price decline has far exceeded expectations, export profits for aluminum stranded wire have already turned negative, and the sustainability of orders is limited, calling for caution against a marginal weakening trend in market demand. This week, the operating rate of China's aluminum wire and cable industry was recorded at 69.4%, up 0.8 percentage points WoW, sustaining its elevated trend. During the week, the industry's operating rate continued to climb, with the dual-driver pattern of export orders and State Grid deliveries persisting. Enterprises steadily advanced production based on existing production plans, keeping the overall capacity utilization rate within a high prosperity range. Currently, the industry's operating logic has not changed substantially. The resilience of export demand, combined with medium- to long-term order reserves from power grid tenders, jointly supports the capacity utilization rate staying in a relatively strong range. Against a 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.