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Operating rates at aluminium processing enterprises continued to decline due to tighter logistics and CNY

iconFeb 1, 2021 14:46
Source:SMM
Operating rates across major aluminium processors decreased 3.6 percentage points from a week ago to 71.8% last week. The decline was mainly due to less operations ahead of Chinese New Year and tightening of logistics.

SHANGHAI, Feb 1 (SMM) – Operating rates across major aluminium processors decreased 3.6 percentage points from a week ago to 71.8% last week. The decline was mainly due to less operations ahead of Chinese New Year and tightening of logistics. Construction extrusion, wire and cable, and secondary aluminium industries saw bigger decline. Construction extrusion, and wire and cable producers have gradually closed for CNY due to reduced orders, while secondary aluminium producers were forced to reduce orders and production due to tightening raw material supply. However, plate, strip, foil and industrial extrusion producers had relatively abundant orders and maintained stable production. The overall decline in operating rates at aluminium processing enterprises is expected to gradually expand after entering February as most of the small and medium-sized processing companies will close in early February, but the decline at major enterprises will remain relatively slow.

Primary aluminium alloy: The weekly operating rate of primary aluminium alloy producers remained stable at 69.6%, supported by pre-holiday downstream stockpiling. Only one large company in our sample said that orders in February were modest and plans to keep output unchanged from January, while the rest plan to reduce production by 10-50%. A few of the smaller aluminium wheel factories have closed last week for CNY, while most factories will shut down this week, taking a 7-20 days CNY break. It is expected that the operating rate of major primary aluminium alloy enterprises will decline slightly this week.

Aluminium plate and strip: Major aluminium plate and strip enterprises maintained steady operating rates last week. Major aluminium plate and strip enterprises will take a shorter CNY break this year as orders are scheduled until March and as the local government encourages workers to celebrate CNY at their workplaces.  Operating rates at small and medium-sized enterprises continued to decline due to high gas prices, environmental pressure and approaching of CNY. It is expected that operating rates at major aluminium plate and strip enterprises will remain stable this week, while those at small and medium-sized enterprises will continue to decline.

Aluminium wire and cable: Operating rates at major aluminium wire and cable companies dropped 2.6 percentage points last week. Some producers suspended some production lines as some migrant workers have returned home for CNY. Current production is mostly for delivery in March. Producers in Jiangsu and Zhejiang will generally close around February 6 for CNY and resume production around February 19.

Aluminium extrusion: Operating rates at major aluminium extrusion enterprises dropped sharply last week. The decline at construction extrusion companies was bigger than that at industrial extrusion companies. Producers in some regions have closed for CNY. Some producers halted some production lines due to falling orders and workers returning home for CNY. According to SMM survey, most of the small and medium-sized enterprises have stopped work before January 31. Large enterprises mostly plan to close in early February and no later than February 7. Large enterprises plan to resume production on February 18, while small and medium enterprises will not re-open until after February 26. Overall operating rates are likely to decline sharply this month.

Aluminium foil: Operating rates at major aluminium foil enterprises were basically flat last week. Domestic demand for automotive foils, battery foils, and air-conditioning foils remained strong. Overseas orders for soft packaging foil and Tetra pack foil were sufficient, mainly because European customers were concerned about the impact of anti-dumping and placed orders in advance. Small and medium-sized enterprises reduced production due to approaching CNY and tighter logistics, and the impact on them will increase this week. However, large enterprises will continue to run close to full capacity.

Secondary aluminium alloy: Operating rate of major secondary aluminium enterprises decreased by 0.7 percentage point to 57.4% last week. Transport disruptions in north China due to the pandemic and closure of aluminium scrap recyclers have tightened supply of raw materials, weighing on production at secondary aluminium plants. Some companies have stopped taking new orders, and some purchased primary aluminium instead, resulting in higher costs. Downstream die-casting companies will generally close after February 5 for CNY, pre-holiday stockpiling was weak.  Some secondary aluminium companies stopped production for maintenance at the end of January, so operating rate is expected to continue to decline this week.

Operating rates at major aluminium processors by region (updated on Jan 29)

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