March 2, 2025
Aluminum Wire and Cable:
After the Chinese New Year, the aluminum wire and cable industry resumed production at a steady pace. This week, the operating rate of leading enterprises reached 53%, up 2 percentage points MoM, mainly due to the orderly resumption of work as planned. However, compared to the 60% operating rate in the same period of 2024, the current rate still shows a YoY decline of 7 percentage points. The weaker recovery in capacity compared to last year is mainly constrained by two factors: first, the peak delivery period for the industry has not yet arrived; second, the total volume of pending orders for delivery is lower than the same period in 2024, directly impacting operating momentum.
Regarding new orders, although the State Grid's ultra-high voltage (UHV) transmission and transformation projects brought over 200,000 mt of orders after the holiday, there are still no signs of concentrated tenders for overhead line orders related to provincial grids. The pace of order realization in 2025 remains to be observed. Meanwhile, as there were only five UHV tenders in 2024 compared to seven in 2023, the actual UHV orders realized in 2024 decreased. This reduction in pending orders for delivery directly led to a slightly weaker operating rate for aluminum wire and cable after the holiday compared to early 2024.
Returning to the current industry situation, although the operating rate in the aluminum wire and cable industry appears sluggish, enterprises are still gearing up. On one hand, the industry's peak season cycle differs from other aluminum processing industries. While current downstream rigid demand remains weak, enterprises are restocking raw material inventories at low prices to ensure normal production in the future. On the other hand, current operations aim to increase finished product inventories to prepare for potential "tight delivery" scenarios later. Enterprises mentioned that the delivery peak in the aluminum wire and cable industry is extremely tight. Once the intensive delivery phase begins, there is almost no room for excess finished product inventories. Therefore, maintaining operations during the current off-season helps achieve the planned annual production.
Brief Analysis: According to data from the National Energy Administration, total investment in power grid projects in 2024 reached 608.3 billion yuan, up 15.2% YoY from 527.7 billion yuan in 2023. In 2025, the State Grid is expected to increase investment, potentially exceeding 650 billion yuan for the first time, with a focus on UHV projects. In 2024, China saw three UHV projects start construction and three go into operation, with relatively slow tendering and construction progress. It is expected that the tendering process will accelerate in 2025. The State Grid has announced plans for six UHV material tenders in 2025, one more than in 2024, but the specific tender amounts and quantities remain unclear. SMM believes that the aluminum wire and cable industry is currently in an "order cooling period." Although enterprises are gradually scheduling production, the industry still relies on the realization of orders related to power grid construction to meet expectations. The operating rate for aluminum wire and cable is expected to remain weak in the short term, with a potential boost after April when power grid projects resume and the pace of cargo pick-up accelerates.
Aluminum Rod:
Due to optimistic expectations for power grid investment in 2025, increased tasks for liquid aluminum alloying, and changes in corporate strategies, the operating rate on the supply side of aluminum rods shows a steady upward trend, with indications of continued capacity expansion within the industry. As of December 2024, SMM's domestic aluminum rod sample capacity stood at 7.54 million mt. However, based on SMM's market tracking, at least 144,000 mt of new capacity is expected to come online in the first half of 2025, distributed across Xinjiang, Guizhou, and Gansu. Additionally, with the commissioning of PV and wind power new energy installations, demand for power grid construction remains significant. Coupled with the trend of "aluminum as a substitute for copper," end-use consumption expectations remain positive, providing momentum for the continued growth of aluminum rod supply.
On the demand side, aluminum rod processing fees remained stable after the holiday, fluctuating rangebound. Due to in-plant inventory accumulation at aluminum rod plants and weak downstream rigid demand, processing fees lacked upward momentum. However, downstream and traders showed restocking demand at low prices after the holiday, resulting in notable transaction performance. Currently, the correlation between aluminum rod market transactions and aluminum price fluctuations is significant. The accumulation of in-plant inventory and weak downstream fundamentals have directly pressured processing fees. Future attention should focus on aluminum price fluctuations and changes in the delivery pace of the aluminum wire and cable industry, which will impact market transactions.
Regarding processing fees, the average ex-factory monthly price for 1A60 in February was 300 yuan/mt in Shandong, up 297 yuan/mt from January; 397 yuan/mt in Henan, up 47 yuan/mt; and 158 yuan/mt in Inner Mongolia, up 7 yuan/mt. Among the three major mainstream trading regions, the average monthly delivered price was 333 yuan/mt in Hebei, up 14 yuan/mt; 433 yuan/mt in Jiangsu, up 14 yuan/mt; and 561 yuan/mt in Guangdong, up 73 yuan/mt.
