Operating rate at major aluminium processors dropped slightly in the off-season, wire and cable sector outperformed others

SHANGHAI, Jul 13 (SMM) — Operating rates across major aluminium processors slid 0.1% from a week ago to 72.7% last week. Aluminium wire and cable sector performed the best due to concentrated delivery to the State Grid, while other sectors were affected by the off-season.

Aluminium plate, strip and foil enterprises reported smaller decline in operating rate thanks to more abundant orders. Production schedules at large aluminium extrusion producers range from 20 days to 30 days, while operating rate of small and medium-sized enterprises continued to decline. Operating rate at casting aluminium alloy companies continued to fall due to the off-season and car chip shortage. Demand growth at wire and cable companies alone is insufficient to support operating rate in the entire aluminium processing sector in the off-season. It is expected that operating rate at major aluminium processors will still see a slight drop this week.

Primary aluminium alloy: The operating rate of large primary aluminium alloy enterprises remained stable. Only a few enterprises reported that new orders increased in July from the previous month. Many companies believe that the shortage of car chips remains the main obstacle that restricts demand for primary aluminium alloys. Since July-August is the traditional off-season for the primary aluminium alloy industry, operating rate is expected to remain at a low level for a long period of time.

Aluminium plate and strip: The operating rate of large aluminium plate and strip enterprises fell by 0.6% to 86.2%. Large companies were less affected by the off-season due to sufficient backlog orders, while most of the small and medium-sized companies reported decline in new orders. There were market rumours that Novelis will reduce 300,000 mt of can stock capacity and switch to auto sheet instead. If this news is true, can stock segment will perform well in the off-season. Many construction aluminium plate companies reported that orders have shown an upward trend. Strong demand for can stock and building materials may help narrow the year-on-year decline in operating rate of major aluminium plate and strip enterprises.

Aluminium wire and cable: The operating rate of major aluminium wire and cable companies increased by 1 percentage point as companies raised output after production and transportation restrictions in some areas were lifted after July 1. Concentrated delivery to the State Grid at the end of the month supported operating rate at large companies. Spot aluminium price once hit a high of 19,100 yuan/mt, but large companies were little affected as they generally hold positions in the futures market for hedging. Aluminium rod processing fees were weak, while wire and cable stable producers restocked as needed. Operating rate at large companies is expected to remain positive in the short term.

Aluminium extrusion: The operating rate of large aluminium extrusion enterprises remained stable. Large enterprises basically produced at full capacity and plan to increase capacity. The production and delivery schedule at large enterprises is generally 20-30 days. Some orders have not been scheduled for production. Orders and operating rates of construction extrusion companies weakened. Exports were also weak and rising sea freight discouraged some companies from selling overseas. In response to volatile aluminium prices and low processing fees of aluminium billets, extrusion companies reduced the proportion of retail orders and rely on long-term orders. The off-season will have a certain impact on orders of some companies, but operating rate of major companies will remain at a high level.

Aluminium foil: Operating rates at major aluminium foil producers fell 0.9 percentage point to 87%. Aluminium prices rose to around 19,000 yuan/mt, but this has not yet had a major impact on major aluminium foil companies. Some companies plan to reduce purchases if aluminium prices rise further. Small and medium-sized companies reported decline in orders and operating rate in the off-season. Operating rate of major aluminium foil enterprises is expected to continue to decline in the off-season.

Secondary aluminium alloy: Operating rate of secondary aluminium alloy enterprises dropped 0.5 percentage point to 55.8%. Price of secondary aluminium rose 100 yuan/mt last week. Trades in secondary aluminium market picked up slightly. Some die-casting companies said orders improved as car chip shortage eased slightly, but others reported poor orders in the off-season, weighing on orders for secondary aluminium. Tight supply and high price of aluminium scrap drove some enterprises to reduce or suspend production. Operating rate is expected to stabilise or continue to fall slightly this week.