SHANGHAI, Dec 10 (SMM) – According to SMM survey, the conversion margins of aluminium billet have been standing high for a long period.
The inventory of aluminium billet across China has been falling for seven consecutive weeks, and may enter a new round of accumulation, since the shipments have started to drop amid sluggish downstream purchases.
The production capacities are widely distributed across China, most of which are concentrated in the central and northern regions. The total installed capacity of aluminium billet in China is about 26.57 million mt, and the top three provinces of the capacity proportions are Shandong (34.44%), Xinjiang (16.58%), and Inner Mongolia (11.84%).
The current data shows that China’s production capacity of aluminium billet is increasing year by year. Despite the large-scale production cuts and restrictions under dual control policy of energy consumption, the output of aluminium billet in 2021 still grew on the year, so the annual output of 2021 is expected to increase by 9.76% from the previous year to 15.06 million mt.
The installed production capacity of aluminium billet is expected to rise 5.38% from 2020 to around 28 million mt in 2021.
The downstream users of aluminium billet reduced the purchases and turned to purchase aluminium ingot for remelting, in order to lower the costs. The inventory of aluminium billet is expected to drop more slowly in the short term, and is likely to start increasing in one to two weeks. The conversion margins may peak as well.
The production capacities of remelting billet are mainly distributed in east China. The total installed capacity is about 7.9 million mt, and the top three provinces with the capacity proportions are Guangdong (20%), Henan (16%), and Shandong (15%).
The output of remelting billet accounts for about 18% of the total aluminium billet in 2020. The aluminium prices and conversion margins increased simultaneously in 2021, and most companies tended to produce remelting rods to reduce the costs. The output of remelting billet is expected increase 1 million mt in 2021, equal to 1/4 of the output of the billet produced from aluminium liquid.
Based on the downstream consumption, the output of aluminium extrusion is expected to increase slightly. As the largest downstream sector of aluminium billet, the output of aluminium extrusion in 2020 increased by 7.65% from 2019. And it is expected to increase by 4.55% on the year in 2021.
Even so, the operating rate of downstream aluminium extrusion companies is expected to drop due to various reasons.
The exports of aluminium extrusion started to drop in H2 2021, and the total annual exports are expected to be far lower than 2020.
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