SHANGHAI, Apr 24 (SMM) – Processing fees for aluminium billets are expected to remain robust in the medium term as orders for aluminium extrusions, the major consumer of billets, improve in a peak March-May season.
Operating rates across manufacturers of aluminium extrusions in China averaged 60.4% in March, showed an SMM survey. The rate is expected to rise to 62% in April and change little in May.
The supply of aluminium billet held steady with new capacity coming online and lower output from Xinjiang and Shandong.
East Hope raised the price of molten aluminium at the end of last year, and this frustrated aluminium billet producers in Xinjiang with over 800,000 mt/year of capacity. The latest SMM survey showed that about eight aluminium billet producers in Changjizhou of Xinjiang have yet to resume operations.
Fewer supplies from Xinjiang boosted aluminium billet processing fees in Guangdong, which relies much on Xinjiang materials. Molten aluminium supply issue also plagued aluminium billet producers in Shandong.
SMM estimated that about 1.5 million mt/year of capacity across the country has been slashed since 2018, while some 1.49 million mt/year of new capacity entered operation.
With stable supply and improving consumption, inventories of aluminium billets have declined since March. Stocks across five major consumption areas, including Guangdong, Wuxi, Changzhou, Huzhou and Nanchang, stood at 98,600 mt as of April 18, in line with levels in March 2018.
The decline in inventories is likely to sustain in anticipation of consumption improvement, which will offer support to processing fees.