PMI of Chinese aluminium processing industry remained in contraction territory in November

SMM data indicates the PMI for China's aluminum processing industry rose 0.3% to 47.3% in November 2023. Off-season onset led to a 4.5% drop in production index to 46.2%, with material procurement index also falling. Sluggish overseas demand and policy changes induced a decrease in new export orders. SMM continues to monitor the impact of export policies

SMM research indicates year-end factors like a surge in automotive sales and grid demand led to a 2.2% rise in new orders. With order backlog recovering and falling aluminum prices, companies increased procurement, pushing up the inventory index.

By specific product types:

Aluminum plate/sheet and strip: In November, the PMI for the aluminum plate/strip industry rose 2% to 47.1%. Despite this, off-season effects led to decreased production and sales for several firms. Customer demand was unpredictable, causing delivery delays. While large firms plan to maintain output in December, the industry PMI may remain below 50% due to reduced production and demand from smaller companies.

Construction extrusion: In November, the construction extrusion industry PMI fell to 49.16%, with a production index of 52.47% and a new order index of 45.36%. This occurred as extrusion factories resumed operations post-October holiday. Increased orders for doors, windows, and curtain walls in East China slightly boosted factory operating rates. However, with a year-end focus on fund recovery, new orders significantly declined. The finished goods inventory index stood at 50%, as processing companies adopted a "produce and dispatch immediately" model, leaving inventory unchanged from October. With dwindling overseas demand and negative policies, new export orders slumped to 48.9%. The Middle East situation reduced some companies' export orders, but they remain optimistic. End-user demand weakness and insufficient follow-up orders dropped raw material purchases to 45.36%, with raw material inventory stable at 48.73%. Given weak demand, market uncertainty, and year-end focus on fund recovery, the construction extrusion industry PMI is expected to stay below 50% in December.

Secondary alloy: In November, the secondary aluminum alloy industry PMI rose 5.6% to 51.7%. Demand remained steady, helped by a rise in auto orders. Increased working days in November slightly improved operating rates. However, winter's onset affected dismantling factories, tightened aluminum scrap circulation, and narrowed price difference between A00 aluminum and aluminum scrap, creating cost pressure. Some businesses cut production, lowering finished goods inventory. December's PMI is expected to drop due to tight raw material supply.

Forecast: As the year-end nears, despite some end-users increasing sales or stocking up, demand in most sectors is weak due to companies focusing on collecting payments from customers. In the construction extrusion sector, funding issues and cold weather slowing construction make production increases difficult. Hence, the domestic aluminum processing sector's PMI index may remain below 50% in December.