SHANGHAI, Apr. 19 (SMM) -- According to a recent SMM survey, the average operating rate at 45 domestic cast aluminum alloy producers representing 3.44 million mt in total capacity was 67.08% during March, up 3.63% MoM, but down 10.85% YoY. SMM believes the gradual commissioning of new capacity and the slowing of downstream consumption growth were responsible for the big YoY drop in operating rates at cast aluminum alloy producers in March.
SMM believes there are four reasons behind lower operating rates in March 2012.
First, more than 450,000 mt/yr new cast aluminum alloy capacity was put into operations in 1Q 2012, but output grew slower due to raw material supply and market demand factors, which directly caused operating rates at cast aluminum alloy producers to fall significantly from 2011.
Second, the growth of China’s cast aluminum alloy consumption was restricted by the slowdown of automobile consumption. Although downstream demand improved in March, demand from new die-casting capacity was limited since most die-casters generally replenished raw material stocks or purchased as needed.
Third, raw material supply shortages constrained the operation of cast aluminum alloy capacity.
Fourth, a small number of large cast aluminum alloy producers cut production for maintenance in march, also constraining the growth of cast aluminum alloy output.
In summary, domestic consumption of cast aluminum alloy remains stable, and downstream enterprises purchase normally. Moreover, the tightness of scrap aluminum supply has been eased in April, and export consumption recovers as well. All these factors may help operating rates at China’s cast aluminum alloy producers improve further, but the rates will still be much lower than 2011 levels.