Automobile sector replaced real estate as major driver of aluminium demand

SHANGHAI, Sep 14 (SMM)— Operating rates across major aluminium processors climbed 0.3 percentage point on a weekly basis to 77.7% last week. Orders for aluminium plate/sheet, strip, foil, primary and secondary aluminium alloy continued to recover at the fastest rate, driven by automobile, construction, electronics and packaging sectors. Orders for extrusion, wire and cable remained weak.

Operating rates are likely to increase slightly this week. Demand from the construction and infrastructure sectors may grow less than expected, while the automobile sector is likely to be the major driver of aluminum demand.  

Aluminium plate/sheet and strip: As backlog orders at large producers could sustain production for 1-2 months, operating rates are likely to rise. Orders improved at most producers. Orders for 5-series and 6-series plain plate/sheet and strip showed signs of increase. New orders for can stock and can tab increased at a slower rate, but there were ample backlog orders. Demand for tanker materials and PS printing plates was stable. Lower aluminium prices did not attract plate/sheet and strip producers to increase purchases significantly, while their clients became more active in picking up goods.  

Aluminium foil: Operating rates are likely to increase amid growing orders. The summer peak season for air-conditioner foil has ended, while demand for battery foil and electronics foil is gradually improving. Demand for light-gauge packaging foil and soft packaging foil remains strong. 

Aluminium wire and cable: New orders from State Grid and backlog orders allowed large producers to maintain stable operating rates, while orders at small and medium-scale producers improved little. Most producers pin their hopes on tenders from State Grid and China Southern Power Grid at the end of September and how fast power grid projects proceed.

Aluminium extrusion: Operating rates at large producers dropped 0.5 percentage point last week, but are unlikely to fall sharply in the short term due to backlog orders. New orders missed market expectations. Tighter controls of the property market and slower-than-expected infrastructure projects have dampened demand in the peak season. Tighter cash flows and weak new orders will continue to affect operations at some producers through the rest of the year. Producers restocked in the second half of the week when aluminium prices trended lower. 

Primary aluminium alloy: Operating rates at large primary aluminium alloy producers rose 3 percentage points from a week ago to 62.2% last week as increasing orders encouraged some producers to increase output. Increase in orders at aluminium wheel plants boosted demand for A356.2 aluminium alloy. Producers in Shandong and Inner Mongolia increased output amid increasing orders, while a producer in southwest China reduced output.

Secondary aluminium alloy: Operating rates at secondary aluminium alloy producers are expected to increase in the short term amid growing demand and falling market share of imported aluminium alloy. Prices of domestic ADC12 secondary aluminium are expected to stabilise following gains that were driven by the peak season, lower supply of imported aluminium alloy and supply concerns of imported aluminium scrap, but may rise at least 200-300 yuan/mt in late September and early October. Handling of aluminium ashes will increase costs at secondary aluminium producers.