SMM Research: Extrusion Sector Drove up the Operating rates of Aluminium Downstream, the Pandemic Supressing Downstream Consumption

SHANGHAI, Apr 14 (SMM) - The average operating rate of major aluminium leading processing enterprises climbed 1.2 percentage points from a week ago to 67.8%. In details, the operating rates of extrusion enterprises rose again. The previous suspended production caused by the pandemic gradually recovered, driving up the whole operating rates slightly. But orders were less than expected except for photovoltaic and 3C electronic sectors. As for the primary and secondary aluminium alloy sectors, the operating rates declined under the impact of the pandemic, and transportation in East China, where alloy plants are concentrated, continued to be restricted and freight costs rose wildly, resulting in reduction of output due to the difficulties in deliveries and inadequate raw materials. The operating rates of aluminium sheet/plate and strip, aluminium foil and strip, aluminium foil and aluminium wire and cable sector remained stable this week, but transport and orders were still not ideal under the pandemic. The pandemic will maintain the biggest factor affecting the operating rates of leading aluminium processing enterprises. The market shall focus on the impact of the pandemic on the transport and production of enterprises. If the pandemic ends, downstream consumption will recover soon and the operating rates of enterprises will pick up sharply.

In terms of different products:

Primary aluminium alloy: The average operating rate of large primary aluminium alloy enterprises fell two percentage points to 67% this week, which mainly due to the reduction in production at a branch of an enterprise under the pandemic. The pandemic has still not improved greatly this week, with transport difficulties in East China and rising freight rates. The shipments of alloy plant were still not smooth. Leading alloy enterprises have not yet adjusted operating rates, and changes in the pandemic are still the most important factor affecting the operating rates of the primary aluminium alloy industry in the short term.

Aluminium plate/sheet and strip: The average operating rate of large aluminium plate/sheet and strip enterprises was flat at 78% this week. Transport efficiency was still low in East China this week and a number of small and medium-sized enterprises in Jiangsu, Zhejiang and Shanghai continued to shut down. The reduction in demand led to the declining orders of aluminium sheet/plate and strip enterprises in Henan and Shandong with downward operating rates in the industry. The market shall focus on the latest progress of the pandemic and transport. If the transport restrictions loosen, the operating rates of industry may rebound, while the operating rates of leading enterprise will remain stable in the short term.

Aluminium wire and cable: The operating rates of the leading aluminium wire and cable enterprises stood at 53% this week. The pandemic in Wuxi has eased with improved transport in the region. The enterprises should arrange the shipments of finished goods inventory and replenishment of raw materials as soon as possible. The pandemic has a greater impact on the supply chain operation of industry. In order to reduce the risk of transport disruptions, most companies increased the amount of stocks. But the terminal demand in State Grid and other cable was in a downward movement. With the consumption of orders in hand, the operating rates of companies may decline.

Aluminium extrusion: The operating rates of large aluminium extruders rose by 1.5% to 75.5% on the week. The main reason was that the resumption of production in enterprises that stopped production at the beginning of the pandemic continued to improve compared to last week, driving up the operating rates. In details, most of construction aluminium extruders maintained normal production this week. But the pandemic led to the lockdown of some areas, while transport costs increased largely with rising finished products inventory. Industrial extruders maintained stable production this week, but the increment of orders was less than expected under the pandemic, except for photovoltaic and 3C electronic sectors. In the short term, the operating rates of domestic extrusion has maintained a positive trend, while the situation in real estate industry has been eased. If the pandemic improves, the orders of construction extruders may increase. It is expected that the operating rates of leading aluminium extruders will increase slightly next week. The market shall focus on the impact of the pandemic on some areas.

Aluminium foil: The operating rates of leading aluminium foil enterprises stood at 80.7% this week, and there was no significant improvement in the transport in Jiangsu and other places this week. Local small and medium-sized aluminium foil enterprises have seen a significant drop in output and sales, while the operating rates of local leading enterprises remained unchanged. By products, orders of food packaging foil were sufficient supporting by the rigid demand of terminal. Although products like air-conditioning foil, brazing foil and other products have entered the peak season, the orders were less than expected by the impact of the pandemic. At present, the market is generally optimistic about future consumption, and believes that consumption is bound to recover after the end of the pandemic. The operating rates of the aluminium foil industry will pick up significantly.

Secondary aluminium alloy: The average operating rate of large secondary aluminium alloy enterprises dropped by 3.1 percentage points to 47.2% this week, which mainly due to the reduction of production in alloy plants in Jiangsu caused by the pandemic and the limitations of imported aluminium scrap in Guangdong. Prices of aluminium fluctuated largely this week. While the prices of secondary aluminium alloy lacked of upward momentum due to the weak demand. With thin profits of corporates and transport restrictions of raw materials and finished products in alloy plants, many manufacturers reduced output. In addition, the recent arrivals of imported aluminium scrap were not smooth in Guangdong and the local alloy plants were forced to reduce production due to the shortage of raw materials. If the demand continues to be weak and the pandemic to suppress transport efficiency, the operating rates of secondary aluminium are expected to decline in the short term.