[SMM Weekly Survey] domestic demand in the downstream bright spot of aluminum is still strong and the impact of weak export orders is initially revealed.

SMM, May 22, 2020:

During the epidemic period, SMM tracked the start-up situation of aluminum downstream processing leading enterprises on a weekly basis in order to understand the most real situation of aluminum downstream processing enterprises resuming work. SMM survey samples are distributed in 12 provinces in China, a total of 41 enterprise samples, the specific distribution is as follows:

Taken together, the start-up of leading enterprises downstream of aluminum this week increased slightly by 1.3 percentage points, mainly stable as a whole, but consumption in the lower reaches of the original aluminum declined. Bright spot consumer plate construction, medicine and so on still maintain strong consumption, seasonal air conditioning foil, beverage and beer sealing foil demand increases, making aluminum foil demand increase slightly. The expected impact of export orders was mainly reflected in aluminum plate consumption, which fell slightly this week. Specifically, the bright spot consumer construction, pharmaceutical sector consumption is still strong, the product structure is more corresponding profiles, aluminum plate strip and foil enterprises existing orders can cover the whole of May, short-term start will be stable; on the other hand, the decline in export orders is more significant, especially reflected in aluminum plate enterprises, at the same time, due to the weakening of aluminum plate downstream, aluminum plate has become the first to show fatigue in the downstream consumer end of primary aluminum. Interestingly, due to the rise in aluminum base prices, aluminum bar processing fees continue to weaken, downstream aluminum profile enterprises have a second hoarding behavior, did not fall into complete on-demand procurement as previously expected, but this will continue to overdraft follow-up consumption to a certain extent. In terms of recycled aluminum, the increase in operating rate is only due to the sample enterprises adjusting the production pace, making production more compact, do not rule out the possibility of an increase in the scale of production in June, the current consumption of its main terminal cars remains weak. As for aluminum bars, as the current aluminum bar processing fees are still high, the proportion of waste aluminum added to aluminum water bars is still relatively low, and the original aluminum waste aluminum consumption still exists, and the subsequent consumption may weaken synchronously with the decline of aluminum bar processing fees. It is expected that there will be a slight decline next week as the current orders of aluminum processing enterprises are still relatively sufficient, mainly due to the weakening impact of export and middleman orders.

In terms of specific product types:

Primary aluminum alloy: the start-up of primary aluminum alloy continued to stabilize at 55% this week. The start-up load of the aluminum wheel factory increases slowly, and the enterprises that account for a large proportion of foreign trade still maintain low-load operation. In April, large factories in Shandong switched to aluminum bars to reduce A356.2 production, this part of the capacity has no short-term recovery plan, and the operating rate is expected to remain stable next week. Also because the start-up of large factories has not resumed, the processing fee of A356.2 will be maintained at the high level of 750 yuan / ton (including tax ex-factory price).

Aluminum strip: the operating rate of large plate and strip enterprises this week is nearly 5 percentage points lower than that of last week. After advancing to late May, leading plate and strip enterprises all reported that the speed of new orders was slower than that of the previous period, because, in addition to the weakening of market demand, it was also related to individual manufacturers changing the way of collection (requiring customers to pay first and then goods). At present, the order scheduling period in the hands of large-scale plate and strip enterprises is about two weeks to one month, which is shorter than the previous two weeks. In terms of orders, the current orders for building curtain wall panels, 3C oxidizing materials and fuel tank materials are better, but the orders related to cans and automobile plates have not improved much at present. In terms of domestic and foreign trade, the impact of foreign trade is further highlighted, enterprises with a relatively high proportion of exports report that their foreign trade orders decline by more than 40%, and at the same time, domestic trade orders tend to shrink, and the enthusiasm of customers to place orders is not as good as that of the previous period. In addition, individual enterprises reported that some of them normally hoarded goods when aluminum prices were low in the early stage, and the company has returned to normal purchasing pace with the rise in aluminum prices. On the whole, enterprises are not very optimistic about consumption at the end of May and June, thinking that due to the impact of the epidemic, the original off-season of traditional consumption may be weaker.

Aluminum cable: the operating rate of large cable companies this week is the same as that of last week. According to the feedback of large cable enterprises, the market is relatively stable. Because the cable order scheduling period itself is relatively long, the production plan is determined according to the demand of the national network. Because the enterprises received more orders before the year ago, the current operating rate can still maintain a stable state. However, the production is still dominated by the orders received in the previous period. So far, the orders released by the southern network of the national network are still not obvious, and the municipal engineering orders show signs of warming up. However, the order magnitude of this part of the order is difficult to be compared with the order volume of the national network, so it has little contribution to the overall operating rate. As far as the raw material end is concerned, recently, the processing fees of aluminum rods in North and East China have fluctuated, and the feedback from the holders that in addition to the rise in the base price of aluminum, it is also one of the reasons why the downstream stock preparation is not as strong as the previous period.

Aluminum profiles: the operating rate of profile enterprises remained stable this week. Orders for building profiles are concentrated in the areas of doors and windows, curtain walls and formwork, and the expected demand for old city renovation and new infrastructure is strengthening. The demand for industrial profiles in automobiles, home appliances, machinery and equipment continues to recover. Exports are still affected by overseas outbreaks, and it will take time for them to return to normal. In terms of raw materials, after the base price soared, aluminum bar processing fees fell under pressure across the board, while processing fees in Foshan, Wuxi, Nanchang and other places fell sharply, and some downstream just needed replenishment while the price was low. Large-scale enterprises have plenty of waiting orders, and the space for adjusting the operating rate of profiles is limited in the short term.

Aluminum foil: the operating rate of aluminum foil this week is 88.5%, up 2.5% from last week. The main growth point is still in the air-conditioning foil. On the one hand, from the point of view of supply and demand, the epidemic has indeed suppressed part of the demand, and now the outbreak is concentrated, and the air-conditioning plant has also increased the task of production and marketing because of the previous epidemic; on the other hand, due to the rise in aluminum prices, some downstream enterprises hope to settle accounts with the lower aluminum prices last month, so they have increased their orders and prepared goods; the output of packaging foil has increased slightly from the previous month, and is still in a good condition. As the two largest products in the aluminum foil industry, the air conditioning foil and packaging foil market are relatively good, and even some air conditioning foil and packaging foil enterprise orders are better than last year, and most enterprises are more optimistic about the market. Due to the impact of the epidemic in overseas automobile factories, the market for brazing foil is still in the doldrums; the ratio of electronics to battery foil rings has not changed; and in terms of hot sealing foils, orders for beer labels and beverage sealing foils have improved and production has increased due to the arrival of summer. In terms of exports, there is still no major improvement, and the improvement in the market operating rate is mainly driven by domestic sales, and some foil products have entered the peak season of production and marketing. now, the increase in the output of aluminum foil by domestic demand can last for at least two months, because some big manufacturers said that orders in July had been filled. It is expected that the operating rate of aluminum foil will continue to be maintained next week, or there may be a small increase.

Recycled aluminum alloy: the operating rate of the recycled aluminum industry rose 12.5 percentage points this week, but the increase in operating rate was mainly due to the adjustment of production rhythm by recycled aluminum enterprises in the sample, making production more compact, and there was no significant improvement in demand. From the demand side, although the automobile sales data of the Automobile Association increased in April compared with the same period last year, first, the base of automobile sales data was low last year, and second, the association sales data caliber was factory rather than terminal sales, and its feedback to recycled aluminum enterprises still took time. It can only feedback the improvement of consumption in terms of marginal changes, which has not brought a significant improvement in demand to the recycled aluminum industry. The continued increase in import arrivals to June is still putting pressure on the operating rate of the recycled aluminum industry on the supply side. In terms of aluminum bars, the price difference of cooked aluminum is still shrinking compared with that of A00 aluminum, but the proportion of waste aluminum at the end of aluminum water bars is still low compared with the same period last year, and there is still a certain amount of original aluminum waste aluminum under high processing fees for aluminum rods. It is expected that this part of consumption will gradually decrease with the decline of aluminum bar processing fees.

(Shanghai Nonferrous net Aluminum Group)