Outlook for Aluminum Processing Gloomy in 1H 2013 on Soft End-User Demand

SHANGHAI, Jan. 17 (SMM) – Raw material inventories at producers of automobiles, cans, home appliances and electric equipment have slid to a record low. Recovery in aluminum processing industry in 1H 2013 depends on whether end-users will rebuild raw materials. 

Whether end-users will replenish stocks depends on their orders. New orders at home appliance and electric equipment producers are thin at the moment. Demand for home appliances, especially air-conditioners is anemic, deterring end-users from stockpiling raw materials, which purchase only when needed.

Besides, producers say they have secured new loans at the beginning of 2013, but most still suffer from tight cash flows. This is because payment period has been extended and most of the payment is on an acceptance basis. As such, end-users make purchases as needed. Meanwhile, aluminum semis supply is in surplus, so end-users choose to shorten restocking period and quicken delivery period, forcing aluminum processors to step up inventories of semi-finished goods.

Over two thirds of the surveyed producers anticipate that end-users will continue to purchase on an as-needed basis against overcapacity and liquidity crunch and that restocking will not return to earlier high levels. This suggests that aluminum processing industry should head into the first half of 2013 with a gloomy outlook.