According to SMM data, the comprehensive PMI index of the domestic aluminum processing industry recorded 29.1% in February 2024, still below 50% and with a large decline. From the perspective of subdivided indicators, in February aluminum processing companies were basically shutdown during the Spring Festival holiday, only some large companies maintained production, but the output was lower than usual. Therefore, the production index this month fell significantly month-on-month, recording 20.9%; at the same time, post-holiday downstream demand has not fully recovered yet amid the traditional off-season, and the new order index fell, recording 22.7%. According to SMM research, the aluminum processing industry generally believes that terminal demand will not recover until March; due to the reduction in production and order volume, the purchase volume of raw materials has subsequently decreased. Coupled with the weak terminal consumption in recent years, companies have mostly purchased and produced on demand. The raw material inventory index recorded 35.3%, and the finished product inventory index recorded 28.4%.
Specifically:
Aluminum plate/sheet and strip: The PMI of the aluminum plate/sheet and strip industry in February was 22.9%, a month-on-month decrease of 30.1 points. Mainly due to the arrival of the Spring Festival in February, some companies have suspended production for holidays or slowed down their production. At the same time, many downstream companies also have holiday plans during the Spring Festival, resulting in a decline in order volume. In addition, the end of January coincided with the pre-holiday logistics outage, and the raw material inventory of companies that did not stop production during the Spring Festival was generally at a high level. At the end of February, the inventory dropped to normal levels, dragging down the total PMI. March has entered the traditional consumption peak season, and most companies' orders and output have been able to achieve positive growth compared with February, pushing up the PMI, which is expected to be around 72.3%.
Aluminum foil: The PMI of the aluminum foil industry in February was 19.5%, down 18.6% from the previous month, and remained below 50%. Although there are few aluminum foil factories that have concentrated holiday during CNY, some companies slowed down their production pace around Feb 9. Many companies reported that new orders in February declined month-on-month, which has pushed the aluminum foil industry PMI to continue to maintain at below 50%. With the end of the Spring Festival in March and the entry into the peak consumption season, order volume and output are expected to increase month-on-month. The PMI is expected to rise above 50% and stand at about 77.3%.
Construction aluminium extrusion: In February, the comprehensive PMI index for construction aluminum extrusion continued to decline due to the Spring Festival holiday, recording 32.48%. In terms of sub-indexes, the enterprise production index and new orders index are still below 50%, recording 3.31% and 39.50% respectively. The production index has fallen sharply again, mainly due to output cut during holidays; on the other hand, compared with other terminal sectors, real estate-related projects have a longer holiday period. As a result, downstream demand for construction aluminium extrusion remained weak in February, and orders were insufficient. Companies subsequently reduced raw material purchases, with the purchase volume index recording 33.57%. In addition, due to the shutdown during holidays, some companies had a backlog of orders before the year, with the backlog index recording 66.50%; after resuming work at the end of February, some employees leaving or not all returning to work, and the index for employment fell, recording 37.32%. According to SMM research, extrusion factories have begun to enter the post-holiday resumption stage. The recovery of the demand and supply are expected to return to normal in March. Therefore, the PMI index may improve in March 2024.
Industrial aluminium extrusion: In February, the PMI total index of the industrial aluminum extrusion industry recorded 41.41%, below 50%. In terms of sub-indices, the production index recorded 5.05%, but the new orders index recorded 63.02%. This was mainly due to the production reduction during Spring Festival. However, the downstream demand for industrial materials recovered faster than that for building materials, thus driving the new orders index to rebound. Affected by the improvement in automobile and photovoltaic orders, the raw material purchasing volume index of processing enterprises remained above 50%, recording 56.33%. In addition, some companies have adopted a shift system to resume production considering that it is rare for workers to return home. Workers are expected to resume work at the end of February and early March. Therefore, the employment index fell below the 50%, recording 43.70%. Overall, the photovoltaic and automotive sectors have resumed production quickly, downstream orders are relatively stable, and some companies have started operations at the end of the month and are close to full production. It is expected that the PMI of the industrial aluminium extrusion industry will rebound to above 50% in March.
Aluminum wires and cables: In February, the PMI composite index of the domestic aluminum wires and cables industry recorded 42.6%, a month-on-month decrease of 8.75 percentage points, falling back below 50%. Judging from various indexes, as companies went on holiday in Spring Festival, the industry entered the off-season. In February, most companies suspended production according to national holidays. A small number of leading companies maintained production and continued to rush to deliver UHV orders, providing support for the production index. The production index fell 21.4% month-on-month to 33.4%. During the Spring Festival, companies focused on withdrawing funds, and due to weather conditions, power grid construction entered the off-season. The new orders index fell by 8% month-on-month to 37.3%, and the backlog order index fell by nearly 6.3 percentage points month-on-month to 31.67%. In February, companies rushing to complete UHV orders maintained normal production, while other companies stocked small quantities. The purchase volume index fell by 32.4% to 45.21% month-on-month, and raw material inventories fell by 39.1% to 38%. In March, orders from the State Grid are expected to pick up, photovoltaic and wind power projects are also expected to recover, and the operating rate of aluminum wires and cables companies may rebound. It is expected that the PMI index in March will return to above 50%.
Primary aluminium alloy: The PMI of primary aluminum alloy in February was 29.3%, a decrease of 10.9 points from the previous month. During the Spring Festival, many primary aluminum alloy downstream companies suspended production for a long period of time and took holidays. Orders from primary aluminum alloy companies were significantly reduced. The reduction in both output and order volume pushed the industry PMI downward again. In March, with the end of the Lantern Festival and the rebound in terminal market consumption, few companies expect order volume and output to be lower than in January. The probability of positive month-on-month growth is high. The industry PMI is expected to rise above 50%, which is expected to be 64.6%
Secondary aluminium alloy: The PMI of secondary aluminum alloy industry continued to fall in February, falling sharply by 14.7 percentage points from the previous month to 27.8, staying below 50% for three consecutive months. In Spring Festival holiday, secondary aluminum alloy plants successively shut down furnaces for holidays at the beginning of the month. The shutdown duration was concentrated in 5-15 days, and a few lasted for 20 days or more. In addition, the pace of downstream production resumption after the holiday was slow. Therefore, secondary aluminum alloy companies output and new orders declined significantly. In terms of inventory, due to the early holiday and late resumption by aluminium scrap traders, secondary aluminum alloy plants basically completed raw material stockpiling in January, and aluminum scrap prices were high. In February, secondary aluminum alloy plants mainly digested inventory, and raw material inventories fell. In March, with the resumption of work and production upstream and downstream, the production level of secondary aluminum alloy companies will return to pre-holiday, and the industry PMI is expected to rebound significantly.
Brief comment:
At present, aluminum processing enterprises entered the post-holiday resumption stage, and photovoltaic aluminium extrusion, and aluminium wires and cables and other sectors have resumed production relatively quickly. According to SMM research, aluminum processing enterprises generally believe that it will take until March for production and terminal demand to recover, but the construction aluminium extrusion sector still maintains a relatively pessimistic attitude over the market. Overall, as March is the traditional peak season, the production and order volume of aluminum processing enterprises may improve, and the PMI is expected to continue to remain above 50%.
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