SHANGHAI, Sep 6 (SMM) –According to SMM data, the comprehensive PMI index of the domestic aluminium processing industry in August 2023 fell by 1.5 percentage points MoM to 51.6%, and stayed above 50% for three consecutive months. Production, demand, inventory and other indices showed a MoM decline trend, of which the backlog order index fell significantly. The terminal demand of most sectors did not recover. Enterprises scheduled production reasonably, and improved the speed of delivery. In order to ensure stable cash flow, most companies adopt on-demand procurement of raw materials. In terms of sectors, PMI fo aluminium plate, strip, foil, industrial extrusion, cable, primary aluminium alloy and secondary aluminium alloy sectors in August all stayed above 50%, mainly because that the upcoming arrival of peak season brought a small increase in orders and the recent macro favorable policies played a positive role. The construction aluminium extrusion sector was affected by the shrinking terminal demand dominated by real estate, leaving its PMI still below 50%.
Looking at specific product types:
Auminum plate and strip: In August, the PMI for the aluminium plate and strip industry dropped to 52.9%, down by 7.1 points from July. The market supply remained stable, with no major disruptions like power restrictions. As the traditional peak season approached, there were slight improvements in orders, making August's overall order situation better than July's. However, Mexico's decision to increase tariffs on imported aluminium cast a gloomy outlook on the market, making the long-term demand for aluminium plate and strip less optimistic.
Aluminium foil: Aluminium foil industry saw its PMI decrease to 53.3% in August, down by 4 points from July. In August, the aluminium foil market maintained stability, with no significant shifts in production. Demand for air conditioning foil dipped as it entered its off-season, while battery foil saw steady growth, bolstered by the new energy vehicle industry. Packaging foil saw a slight rebound in demand as it approached the traditional peak season, with some businesses noting an increase in orders. As we enter September's peak season, some anticipate order growth, although the extent remains to be seen. The industry's PMI is forecasted to stay above the 50% mark, indicating continued expansion.
Construction aluminium extrusion: In August, the construction extrusion sector saw a composite PMI index of 47.45%, up 2.25 points from July, but still indicating market contraction. Specifically, production and new order indices were at 42.52% and 46.87% respectively, both below the 50% mark, reflecting an off-season trend in the sector. Despite newly introduced supportive policies by the central government, their effects have yet to fully reach aluminium extrusion processing firms due to the lengthy cycle of real estate projects. As a result, both production activities and new orders were less than ideal. However, SMM research shows that increased efforts by the Shandong government to ensure housing delivery brought a slight increase to medium and large aluminium extrusion processing businesses. Moreover, the finished goods inventory index rose to 59.05%, primarily due to increased risks in real estate, downstream pessimism, and funding shortages leading to slower or partial goods pickup. Due to an overseas downturn, new export orders index remained low at 32.41%. With a decrease in production and orders, both purchase volume and raw material inventory indices also weakened, recorded at 45.11% and 47.42% respectively. Furthermore, weather conditions in August caused delivery slowdowns in parts of North China, slightly reducing the supplier delivery time index to 49.60%. By September, these effects are expected to fully dissipate, resuming normal production operations. The construction aluminium extrusion industry is likely to remain in its traditional off-season in September, with the industry PMI expected to persist below the 50% mark.
Industrial aluminium extrusion: In August, the industrial aluminium extrusion sector's PMI index remained above the 50% mark, reaching 54.12%. Both the production and new orders sub-indices, recorded at 59.48% and 56.67% respectively, stayed above the 50% mark due to a resurgence in downstream demand. Especially since August, the photovoltaic market has demonstrated strong growth, boosting the operating rates and order volumes of related aluminium extrusion processing firms. Yet, according to SMM research, the situation is diverse among photovoltaic extrusion companies, largely due to severe undercutting in processing fees. Some companies acknowledge the substantial demand in the photovoltaic market but are deterred by low processing fees and high product quality demands, leading to high scrap rates among smaller firms. Consequently, these companies are temporarily refraining from increasing investment in the photovoltaic sector. Driven by an increase in industrial extrusion orders, the raw material procurement and inventory indices for processing firms were recorded at 55.83% and 50% respectively, staying above the 50% mark. Most companies mainly procure raw materials as needed, holding only a minimal inventory to ensure future production requirements. Yet, due to the overseas downturn, the new export order index remained 49.21%. Overall, the industrial extrusion sector's PMI is expected to demonstrate stability with a positive outlook in September.
Aluminium wire and cable：The PMI of China's aluminium wire and cable sector reached 52.2% in August 2023, marking a 1.5% increase from the previous month. Throughout August, production volumes among domestic firms remained stable, with some reporting increased deliveries, signaling mild operational improvements. Increased tendering activities in regions like the northwest spurred month-on-month growth in new industry orders, keeping both the new order and production indices above the 50% mark. Overseas demand remained relatively stable in August, keeping the export order index for aluminium wire and cable consistent. As September arrives, the cooling weather and increased outdoor activities such as power grid construction are expected to drive improvements in the wire and cable industry. With some power grid projects speeding up, industry orders are also expected to rise. Hence, SMM predicts the aluminium wire and cable sector's PMI will stay above the 50% mark in September.
Primary aluminium alloy：The PMI for primary aluminium alloy reached 56.1% in August, marking a 4.7% rise month-on-month. Despite sluggish demand in the primary aluminium alloy market, there were few reductions in production throughout August. Several companies resumed production as molten aluminium resources became plentiful again, pushing the industry PMI above the 50%. As September marks the start of the traditional peak season, a seasonal rebound in orders is anticipated. Additionally, certain companies are expected to complete technical upgrades on some production lines in September, potentially leading to an increase in production. As such, the PMI for the primary aluminium alloy sector is predicted to stay above the 50% in September.
Secondary aluminium alloy: The PMI for the secondary aluminium sector climbed 2.2 % month-on-month to 51.6% in August, moving back above the 50% mark. As the automotive industry's peak season neared, orders for secondary aluminium plants started to rebound from mid-August, especially for leading companies. Yet, in regions like Guangdong and Chongqing, the operating rate of secondary aluminium plants dropped due to downstream industries taking high-temperature breaks. Moreover, the tight supply and high prices of aluminium scrap in August made it challenging for smaller factories to increase production amidst cost pressures and order shortages. With the traditional peak season in September, secondary aluminium companies are expected to see continued order recovery, keeping the PMI above the 50% mark. However, current market feedback suggests moderate expectations for September, potentially limiting overall growth.
Summary： As we move into September, an improvement in the operational status of domestic downstream aluminium processing enterprises is anticipated. The construction extrusion sector, boosted by favorable macroeconomic policies and ongoing projects like "guaranteed housing delivery" and "urban village transformations," may see an increase in order volumes, uplifting operational rates of related companies. The industrial extrusion sector continues to see growth in photovoltaic extrusions, while automotive extrusions show signs of stability and improvement as the peak season approaches. The aluminium plate and strip and aluminium foil sectors may experience a minor increase in orders due to the peak season, while the aluminium wire and cable sector may see operational improvements driven by deliveries of power grid projects. Considering these factors, SMM predicts that the PMI for the domestic aluminium processing sector will remain above the 50% mark in September.
