SHANGHAI, Jan. 18 (SMM) – SMM’s latest survey of domestic aluminum extrusion producers shows that new orders will drop at 60% of the surveyed producers in January, remain unchanged at 30% and rise at only 10% producers.
Operating rates had been low at aluminum extrusion producers since 3Q last year due to poor orders. However, operating rates rose to above 60% at construction aluminum extrusion producers after entering 4Q 2012, especially at the end of 2012 as construction of construction projects accelerated. Operating rate in November was the highest in the second half of 2012. In contrast, operating rate at industrial aluminum extrusion producers remains low due to falling investments in high-speed railway and power grid and gloomy solar energy and auto sectors.
Orders at aluminum extrusion producers began to shrink after construction sector slows down. Producers are reporting extremely thin orders ahead of Chinese New Year. As such, many producers are planning to start unit maintenance from middle and late January, a longer break during this year’s Chinese New Year holiday than in the past years. All industries are struggling in liquidity crunch this year. Distributors of aluminum extrusion will consume inventories at hand, with little possibility of restocking prior to Chinese New Year. SMM thus expects operating rate at aluminum extrusion producers to hold at 48% in January this year, with 55% at construction aluminum extrusion producers and 42% at industrial aluminum extrusion producers.
In an effort to combat liquidity crunch, local governments in many regions use plastic steel in the windows and doors of low-income housing, the cost of which is lower than that of aluminum extrusion by half. SMM anticipates this situation will remain in 2013 since fiscal problems at local governments will hardly ease in a short period of time. Investments in low-income housing have dropped, while the number of houses to be built remains unchanged, forcing local government to slash input costs.