The aluminium rod market revived, and processing fees have shown signs of recovery [SMM Analysis]

Last week, the operating rate of leading domestic aluminum wire producers increased by 0.6% to 67.2%. Recently, aluminum prices have seen a significant pullback, leading to a concentrated release of restocking demand and a positive development in the operating rate. Producers have been busy producing backlogged orders. Additionally, in the past week, State Grid orders have been tendered in Qinghai and Jiangxi, and State Grid orders awarded in Jiangsu and Sichuan have been released again, leaving producers with ample orders on hand. It is worth noting that the bid announcements in Jiangsu and Sichuan included heat-resistant alloy stranded wire orders, totaling 68.28 million yuan.

As for aluminium rod market, last week aluminium prices fluctuated narrowly. The overall performance of aluminium rods can be divided into two categories: one is due to rising costs, sellers are reluctant to sell; the other is due to inventory accumulation, sellers chose to sell off inventory at low prices to obtain cash flow. Last week, the aluminium rod market saw a significant improvement in transactions, and market sentiment showed new vitality.

On June 28, 2024, the average ex-factory processing fee for 1A60 ordinary aluminium rods in Shandong was 300 yuan/mt; the processing fee for 1A60 aluminium rods in Henan was reported at 350 yuan/mt; the ex-factory processing fee for 1A60 aluminium rods in Inner Mongolia was reported at 300 yuan/mt; the average delivery to factory processing fee for ordinary rods in south China was recorded at 500 yuan/mt; the average delivery to factory processing fee for 1A60 aluminium rods in Hebei was 350 yuan/mt; and the average delivery to factory processing fee for 1A60 aluminium rods in Jiangsu was 450 yuan/mt.

Although the increase in aluminum rod processing fees is not significant, the market transaction prices rebounded. Supply side, with the increase in market transactions, aluminum rod factories have seen further destocking, and low-price sources are showing signs of reduction. However, with the significant retreat in aluminum prices, aluminum rod companies may face certain obstacles in increasing production due to costs. It is expected that aluminum rod production in June will remain stable or slightly rebound. Regarding processing fees, the market transaction sentiment clearly improved, and companies have ample orders on hand. Due to the retreat in aluminum prices, downstream wire and cable companies have seen a rebound in orders on hand, significantly increasing their enthusiasm for production. It is expected that orders for aluminum rod factories may turn into scheduled production, and processing fees may show a rebound trend.