Aluminium rod supply increased in August, rod makers rushed to sell amid high aluminium price

On the supply side, in August 2023, according to research and statistics by the SMM analysis team on sample data from aluminium rod manufacturers nationwide, the total installed production capacity of aluminium rods in China in August 2023 was 7.184 million mt. In August 2023 (31 days), the total national production of aluminium rods was 360,000 mt, up 11,000 mt, or 3.15% MoM. The operating rate of domestic aluminium rods in August was 60.1%, compared to 58.9% in July, up 1.2% MoM, showing a slight increase compared to June. It is worth noting that there has been an increase in the supply of aluminium rods in August, mainly due to the installation of new production capacity in Southwest China. These new facilities have completed their trial runs and are now in full production, providing more supply options for downstream manufacturers in the vicinity. According to SMM research, most of the resumed and new production capacity in the domestic aluminium rod industry have already concluded. Due to intensified competition in the domestic aluminium rod market and thin profit margins, SMM expects a limited room for further improvement in the supply of aluminium rods in the second half of this year.

In terms of demand, according to SMM research, in the first week of September, the operating rate of leading downstream aluminium wire and cable companies was 61.4%, which is a slight increase compared to the August average of 60.2%. Overall, the operating rate of leading aluminium wire and cable companies meet expectations after the beginning of the peak season. In the short term, the concentration of electricity grid construction has led to increased demand for deliveries in the downstream, which has improved the orders for aluminium rod companies. The aluminium rod market this year has been relatively stable, with steady downstream production. Overall, the southern region was better than the northern region. The main reason for this is that, after the pandemic, the construction of ultra-high voltage projects has been accelerated, and the demand for concentrated deliveries by wire and cable manufacturers has resulted in a good overall performance for aluminium rod orders. The aluminium rod market in the north is more competitive compared to the south. The domestic aluminium rod market has entered the peak season, but its current performance is barely satisfactory. Downstream demand is still primarily driven by procurement according to rigid demand. From August 9, 2023, to the present, the domestic aluminium price has shown a rapid upward trend. During this period, the aluminium rod sector has gradually entered the peak season, with both supply and demand increasing. The supply and demand pattern has remained relatively stable within this month.

Aluminium rod fabrication charges have experienced a nearly three-month downturn and are currently at a low level. Since August, aluminium rod fabrication charges have remained stable. In Shandong province, the fabrication charges for 1-series regular rods were concentrated in the range of 250-350 yuan/mt, in Henan 300-400 yuan/mt, and in Inner Mongolia 50-150 yuan/mt. However, after entering September, there was a slight decrease in fabrication charges. In Guangdong, transaction prices ranged from 500-600 yuan/mt, with some lower-priced supply sources but in limited quantities. Taking into consideration various factors in supply and demand, aluminium rod fabrication charges have remained relatively stable since August. SMM predicts that aluminium rod fabrication charges will continue to fluctuate within a narrow range in September. As the peak season progresses into Q4, there is expected to be some upward potential for aluminium rod fabrication charges.