Operating rates across major aluminium processors extended slight increase, driven by continuous growth in extrusion segment

SHANGHAI, May 25 (SMM)—Operating rates across major aluminium processors increased 2.3 percentage points from a week ago to 77.1% last week. The overall growth was contributed by the significant increase in the extrusion segment. Orders for construction extrusion picked up slightly due to recovering real estate sector, while orders for aluminium formwork increased significantly. Aluminium plate, strip and foil companies maintained full production as orders were full. Wire and cable companies maintained stable production by relying on orders on hand. Operating rates at primary and secondary aluminium alloy ingot companies fell as orders from the car sector declined amid high aluminium prices. Operating rates across major aluminium processors will stay at a relatively high level throughout May and June due to the peak season and recovery of extrusion consumption.

Primary aluminium alloy: Operating rates at major primary aluminium alloy enterprises fell 0.5 percentage point from the previous week to 61.4%. Downstream orders remained poor. Many companies said that production and sales in May were not as good as expected. The pullback in aluminium prices has not yet had direct impact on the primary aluminium alloy market. The price difference between aluminium and silicon narrowed amid sharply rising silicon prices. This, coupled with rising prices of other inputs, shrank profit margin of primary aluminium alloy. Operating rates are unlikely to pick up this week.

Aluminium plate and strip: Major aluminium plate and strip enterprises maintained high operating rates last week. More than one month of backlog orders will allow major aluminium sheet and strip companies to maintain full production in May. New orders from the automobile and 3C sectors fell due to chip shortage. Orders for can stock remained robust. Small and medium-sized enterprises reported fewer orders than large enterprises, and operating rates at some of them fell slightly. The aluminium plate and strip sector is still in the peak season. Operating rates at major aluminium plate and strip enterprises will remain stable this week due to saturated orders.

Aluminium extrusion: Operating rates at major aluminium extrusion enterprises continued to rise. Orders were full at many major aluminium extrusion enterprises, resulting in longer period of delivery. Positive real estate industry boosted demand for construction aluminium extrusion, especially aluminium formwork, which is in short supply. Industrial aluminium extrusion producers have reported strong orders since they resumed production after the Chinese New Year, largely driven by car, rail transport, and electronic sectors. Most producers reported half a month of orders. It is worth noting that many extrusion companies reported insufficient raw materials. Downstream purchase improved after aluminium prices fell back. Operating rates are expected to rise slightly in the short term.

Aluminium foil: Operating rates at major aluminium foil enterprises remained flat last week. Major aluminium foil manufacturers have two months of backlog orders on average. The peak season for air-conditioning foils is coming to an end. Operating rates of air-conditioning foil companies will gradually decline, but the decline is expected to be limited. The pullback in aluminium prices has not yet had a significant impact on the aluminium foil market. Cost pressure of aluminium foil companies has not been effectively eased as aluminium prices are still at a relatively high level. Operating rates of small and medium-sized aluminium foil manufacturers have fallen steadily. If aluminium prices fall slowly, the overall operating conditions of the aluminium foil industry are expected to improve. Large aluminium foil producers are expected to maintain high operating rates this week.