SHANGHAI, Feb. 3 (SMM) -- As most downstream wheel manufacturers shut down production for the Chinese New Year holiday, many A356 alloy producers chose to cut production, bringing operating rates at A356 alloy producers to 66.1% in January, down 9.1% from December.
According to SMM statistics, domestic 14 alloy producers produced a total of 84,000 mt of A356 alloy during January, down 11,500 mt from December. Since downstream wheel manufacturers suspended purchases during the holiday, A356 alloy inventories grew noticeably after the holiday. At present, aluminum alloy producers are stepping up efforts to arrange the shipment, but as drivers at logistics companies have not yet been fully on duty, market supply in Zhejiang remains tight. SMM expects market supply of alloy will be in surplus after the logistics problem is resolved.
Orders at large wheel manufacturers are sufficient, but orders at small and medium manufacturers are insufficient. As wheel manufacturers gradually resume full production, alloy producers will also restart idled capacity successively. Processing sees for A356 alloy are above RMB 550/mt, up RMB 50/mt from pre-holiday level.
SMM predicts processing fees for alloy will be little changed in the short term along with gradual capacity restarts, and the profit margin at domestic alloy producers will remain low as well.