Aluminium rod processing fees increased by 100-150 yuan/mt, and downstream sentiment showed a significant improvement [SMM Analysis]

On July 19, 2024, the average ex-factory processing fee for 1A60 ordinary aluminium rods in Shandong was 450 yuan/mt, up 50 yuan/mt from a week ago; the average processing fee for 1A60 aluminium rods in Henan was 550 yuan/mt, up 150 yuan/mt from a week ago; the ex-factory processing fee for 1A60 aluminium rods in Inner Mongolia was 400 yuan/mt, up 100 yuan/mt from a week ago; the average delivery to factory processing fee for ordinary rods in south China was 700 yuan/mt, up 100 yuan/mt from a week ago; the average delivery to factory processing fee for 1A60 aluminium rods in Hebei was 550 yuan/mt; the average delivery to factory processing fee for 1A60 aluminium rods in Jiangsu was 650 yuan/mt, both regions seeing an increase of 150 yuan/mt.

The aluminum rod processing fee has shown strong fluctuations over the past week, mainly due to the impact on the cost side and the sentiment of downstream buyers. First, on the cost side, the aluminum price has seen a significant pullback, with spot prices lower than the average price. To compensate for the raw material cost deficit, companies are inclined to raise processing fees, supporting price increases. Regarding buyer sentiment, as the spot price of aluminum ingots has fallen below 20,000 yuan/mt, the profit of orders on hand for companies has recovered significantly. Additionally, companies have a large backlog of orders, and their willingness to resume operations has improved markedly, leading to a heightened sentiment for receiving aluminum rods. According to the SMM survey, the transaction sentiment in the three major aluminum rod trading regions of Hebei, Jiangsu, and Henan has improved significantly this week, with shipment volumes rebounding.

Last week, the operating rate of leading domestic aluminum wire producers remained at 67.6%. Recently, leading producers have had relatively full order schedules, heavy production tasks, stable shipments, and overall low levels of finished product inventories, providing strong support for industry operating rate. In the industry, leading producers are currently fulfilling orders mainly for State Grid UHV and power transmission and transformation projects, while small and medium-sized enterprises are primarily handling orders for provincial grid distribution network agreements, overhead conductors, and photovoltaic wind power cables, with variations depending on end-user demand. Overall, the operating rates of leading producers are running at high levels, while the operating rates of small and medium-sized enterprises are on a rebound. It is expected that the operating rate of aluminum wire will show a steady and slight increase in July.