[SMM Research] continued increase in orders in the Construction and Pharmaceutical sectors to support the weakening of New orders in the Lower reaches of the Construction and Pharmaceutical sector will still have to wait for May

SMM, April 24, 2020:

During the epidemic period, SMM through the aluminum downstream processing leading enterprises start weekly tracking, in order to understand the most real aluminum downstream processing enterprises return to work. SMM survey samples are distributed in 12 provinces in China, a total of 41 enterprise samples, the specific distribution is as follows:

To sum up, this week aluminum downstream leading enterprises began to increase slightly, the whole is still stable. Bright spot in addition to the previous hot consumption of building materials, concentrated in Henan aluminum plate and strip enterprise orders surged into a new bright spot. From the perspective of corporate feedback, the surge in orders for aluminum sheet and strip is due to the continued increase in orders in the construction and pharmaceutical industries that have previously performed well, and the second is that middlemen or dealers have begun to hoard goods, but the hoarding may not be sustainable in front of orders. Relatively speaking, the traditional recycled aluminum enterprises have a more obvious drag on the operating rate. First, the recycled aluminum enterprises themselves are in a state of weak supply and demand, and the scope of forced reduction is gradually expanding. Second, the current price difference is basically unable to use A00 aluminum to supplement raw materials, and the consumption of A00 aluminum is greatly reduced. It is worth noting that due to the strong demand downstream, aluminum bar processing fees continue to rise, making aluminum bar profits, aluminum bar industry original aluminum scrap behavior continues to exist. In the aspect of aluminum water bar, almost all enterprises stop the addition of cold material completely, while the remelting bar purchases A00 aluminum directly. A00 aluminum has become the main raw material of the melting bar, so that the non-standard melting rod has almost disappeared in the market. Under the current strong demand, the behavior is expected to continue. Overall, it is expected that the impact of weaker export orders will not be evident in April, and the operating rate of the aluminum processing industry will remain stable next week.

Specific product types:

Primary aluminum alloy: this week, the operating rate of primary aluminum alloy leading enterprises increased slightly by 0.1 percentage points to 61.9% compared with last week. The slight increase in the operating rate is mainly due to the transfer of some orders from the reduced production primary alloy factory to the leading primary alloy enterprises, which is not universal in individual phenomena, and the start of the primary aluminum alloy industry is relatively stable. May Day holiday some aluminum wheel factories plan to arrange a long holiday of about 10 days, the operating rate of primary aluminum alloy leading enterprises is difficult to recover significantly in May.

Aluminum plate and strip: the operating rate of large plate and strip enterprises this week is slightly higher than that of last week. Although enterprises have reported that foreign trade orders affected by the foreign epidemic have not improved significantly, but at present, they have more actively opened up the domestic market and actively adjusted the product structure to adapt to the domestic market. In terms of domestic trade orders, most of the large board and strip enterprises in Henan this week reported that their orders had improved compared with the previous period, especially in the construction and medical equipment industry, and the order growth in the construction and medical equipment industry was the most obvious, and the automobile and packaging were still weak. In addition, downstream said that due to the recent rise in aluminum prices, some middlemen or dealers began to show signs of hoarding, placing orders very actively, resulting in a rapid increase in their own orders, but also expressed concern that the surge in orders may be a pre-order phenomenon, follow-up orders may not be sustainable.

Aluminum cable: the operating rate of large cable enterprises this week is basically the same as last week. Large cable enterprises feedback that their own production of aluminum cable orders are still based on pre-year orders, some enterprises said that at the end of last year UHV related orders are more, in terms of the current production progress and delivery date, it can even be produced until August. In addition, some enterprises feedback, the current foreign trade orders still have no significant improvement, but because the proportion of foreign trade in the overall order is limited, so it has not significantly affected their own production. Overall, it is expected that the operating rate of large domestic cable enterprises in the past two weeks is relatively stable, with the gradual resumption of national network engineering orders, the operating rate will also slowly increase.

Aluminum profile: the operating rate of profile enterprises is stable this week. Profile consumption is mainly domestic, export accounts for a relatively small, construction profiles since the end of March demand continues to be booming, in addition, domestic rail transit demand and photovoltaic industry subsidy policy for industrial profiles to make up for the reduction of some export orders. During the week, the main changes came from the raw material end, aluminum water bar prices rose continuously, Guangdong processing fees broke a thousand at one time, and some profile factories began to raise profile processing fees, suspend new orders, adjust the delivery cycle, and so on. However, enterprises with low price hoarding in the early stage were less affected. At present, construction-related terminal consumption can last at least until mid-May, follow-up orders from large enterprises are relatively stable, while the new orders for small and medium-sized enterprises are not yet clear, focusing on the increase in demand brought about by the new infrastructure of the domestic government.

Aluminum foil: the operating rate of the aluminum foil industry continues to decline. On the whole, research companies say that new orders have begun to decline, and due to the decline in overseas orders, enterprises will gradually shift the focus of orders to the domestic market. With the increasingly serious epidemic overseas, the impact of the epidemic is not only feedback from aluminum foil orders, but also began to affect the price of aluminum foil through the production and marketing of the terminal industry. Sub-products, air-conditioning foil by the biggest impact, the technical threshold is relatively low, this is in the buyer's market air-conditioning foil, in the face of demand-side cuts, the price of processing fees fell sharply this week, compared with last week by 10%-14%. On the one hand, air-conditioning foil manufacturers have no choice but to sell at a low price in order to clear inventory, on the other hand, they have stepped up the transformation of industrial structure to industries with high added value and high demand, such as battery foil, medicine foil and so on. Drug foil is still popular under the epidemic because it is linked to medicine, and some manufacturers are trying to join it; the operating rate of electronic foil is slightly lower than that of last week; the export of food foil in Europe and the United States has not been much affected, or even increased; hot sealing foil has recently entered the peak season, and orders have increased. In terms of orders, orders from aluminum foil enterprises are generally arranged from June 15 to 20. This week's operating rate is still down from last week, and this week may also be the beginning of industrial restructuring and industry reshuffle.

Recycled aluminum alloy: the operating rate of recycled aluminum enterprises this week is 7.8 percentage points lower than that of the previous month. The main reason for the reduction in production is due to the insufficient supply of raw materials, low inventory, poor demand makes it difficult for recycled aluminum enterprises to accept high prices of waste aluminum, raw material inventory continues to decline, while considering that it is difficult to maintain the current start of orders in May, some recycled aluminum enterprises have recently begun to shut down some production lines. Different from recycled aluminum alloy ingots, due to the exuberant demand for remelting bars and rising processing fees, remelting bar enterprises make profits even if they purchase A00 aluminum production. at the same time, because of the large profit space, the remelting bar makes more cooked aluminum waste aluminum flow to aluminum bar enterprises, aggravating the shortage of raw materials in recycled aluminum enterprises. According to the current feedback from recycled aluminum enterprises and SMM research, the order in May is likely to deteriorate further. In the case of no order support, it is difficult for recycled aluminum enterprises to afford enough high-priced waste aluminum, so that recycled aluminum enterprises continue to face the dual pressure of supply and demand, and it is expected that the operating rate will continue to decline. It is worth noting that due to the strong demand downstream of the aluminum bar industry, the behavior of replacing waste aluminum with original aluminum continues to exist. In the aspect of aluminum water bar, almost all enterprises stop the addition of cold material completely, while the remelting bar is the direct purchase of A00 aluminum, which has become the main raw material of the heavy melting bar, so that the non-standard weight melting rod has almost disappeared on the market. It is expected that under the current exuberant demand, the behavior of replacing waste aluminum with original aluminum in the aluminum bar industry will continue to exist.

(Shanghai Nonferrous Network Aluminum Group)