SHANGHAI, Mar 16 (SMM)—High aluminum prices constrained growth in downstream operating rates. Plate, strip, foil and industrial extrusion producers have abundant backlog orders and maintained high operating rates. Construction extrusion producers reported fewer new orders due to high aluminum prices. Demand from the automotive sector was relatively strong , while demand from other sectors was weak, forcing some extrusion producers to reduce production. Wire and cable producers have hedge operation in the futures market and increased production after demand picked up. Secondary aluminum producers kept operating rates largely stable, but cut offers to secure orders amid high inventory of finished products. Operating rates across major aluminum processors are expected to remain largely stable this week.

Primary aluminium alloy: Operating rates at major primary aluminium alloy enterprises increased to 62.9% last week, an increase of 1.1 percentage points from a week ago. Operating rates remained below pre-CNY level as high aluminium price inhibited demand from wheel plants and as reduced molten aluminium supply forced one producer to reduce production. Even if molten aluminium supply recovers, this producer will not resume production to previous highs as it will give priority to other alloy products with higher processing fees. Some orders will be gradually transferred to surrounding primary aluminium alloy enterprises. Operating rate is expected to stabilise this week.

Aluminium  plate and strip: Major aluminium plate and strip enterprises maintained high operating rates last week. The order situation was the same as last week. To reduce risks of high and volatile aluminium prices, most producers reduced raw material inventories and priortised more urgent orders with quicker payment. Some producers restarted melting and casting, cold rolling, and hot rolling capacity.

Aluminium wire and cable: Operating rate of major aluminium wire and cable companies rose 1.6 percentage points last week with the approach of delivery date. Large producers reported long production schedules and were unaffected by high aluminium prices as they have hedging operation in the futures market, while smaller producers may delay purchase and delivery if aluminium prices do not fall back. New orders declined on a year-on-year basis as high aluminium prices kept end-users cautious, but demand for construction wire and cable picked up with the resumption of construction work, helping reduce finished product inventory. Operating rate of major producers will increase slightly this week.

Aluminium extrusion: Operating rates at major aluminium extrusion enterprises dropped slightly. High raw material prices severely hurt new orders, forcing some companies to reduce production. In the industrial extrusion segment, demand from the automotive sector was relatively strong, while demand from other sectors was moderate. High prices of aluminium and silicon reduced orders from the photovoltaic industry. Demand of construction extrusion remained weak due to high aluminium prices. With the gradual recovery of market, operating rates at aluminium extrusion enterprises will gradually return to normal level this week.

Aluminium foil: Operating rates at major aluminium foil enterprises continued to rise last week. Domestic demand for automotive foils and battery foils remained strong, and air-conditioning foil segment began to enter the peak season in March. As such, operating rates at major aluminium foil enterprises will continue to rise this week. Many aluminium foil companies refused to lock in prices with clients at the current high aluminium prices. Export orders fell as the fact that LME aluminium rose slower than SHFE aluminium weakened the price advantage of Chinese aluminium foil, but the impact was not significant. Most small and medium-sized enterprises continued to be affected by high aluminium prices, and their willingness to take orders, purchase, and produce was low, and orders were not saturated.

Secondary aluminium alloy: Operating rates at secondary aluminium alloy companies rose 0.9 percentage point to 59.3%, close to pre-CNY level. Downstream purchase picked up slightly due to smaller fluctuation of aluminium price and depletion of inventory, but most die-casting plants still stood on the sidelines amid high aluminium prices. Raw material supply remained tight with limited imports of aluminium scrap. Secondary aluminium companies are facing high costs. Operating rate is expected to stabilise this week.