SHANGHAI, Jul 8 (SMM) - The average operating rate across major aluminium processing enterprises decreased 0.2 percentage point from a week ago to 66.5% this week. Aluminium wire and cable was the only sector that saw an increase in the operating rates. Aluminium wire and cable companies rushed to produce and deliver out of fears that the transportation could be restricted amid the recent outbreak of COVID-19 in Wuxi. Besides, approaching delivery also drove them to accelerate their production. The operating rates in the primary and secondary aluminium alloy sectors dropped slightly as the off-season and falling aluminium prices suppressed downstream purchases. The operating rates in other downstream sectors did not increase as poor demand and bearish sentiment caused by sharply falling aluminium prices discouraged customers from picking up their cargoes. Aluminium wire and cable companies may be able to maintain stable production on the back of upcoming delivery to ultra-high voltage projects, while the operating rates in other downstream sectors could potentially fall due to the off-season and sharp drop in aluminium prices.
Primary aluminium alloy: The average operating rate of large primary aluminium alloy enterprises fell 2 percentage points to 60% this week mainly because slack demand forced one producer to reduce its production further. As the approaching off-season has exacerbated the already poor new orders, many primary aluminium alloy factories are planning to cut their output. It is expected that the operating rates will fall further, with no turnaround in sight until September.
Aluminium plate/sheet and strip: The average operating rate of large aluminium plate/sheet and strip enterprises remained at 81% this week. Weak demand and sharply falling aluminium prices discouraged downstream customers from picking up their deliveries. However, customers in Jiangsu, Anhui, Xi'an and some other regions rushed to stock up as they are worried that the recent resurgence of the pandemic will hinder transportation in the future, allowing the production of local aluminium plate/sheet and strip enterprises to increase. On the whole, major aluminium plate/sheet and strip enterprises are able to maintain stable operating rates, but there may be little room for increase under the background of insufficient new orders.
Aluminium wire and cable: The average operating rate of large wire and cable companies increased 1.4 percentage points to 58.4% as the COVID outbreak in Wuxi prompted enterprises to step up their production and delivery before transportation is hindered. In addition, approaching delivery also allowed large enterprises to raise their production. Considering the upcoming delivery to some ultra-high voltage projects, SMM believes that operating rates of large enterprises will be largely stable.
Aluminium extrusion: The average operating rate of large aluminium extruders was flat at 70% this week. The demand for construction extrusion remained lacklustre, and even declined at some companies. The orders for industrial extrusion were stable and outperformed those for construction extrusion. Downstream enterprises became more cautious in purchasing as they expected aluminium prices to go down further. In light of rising ocean freight and weakening overseas demand, the export orders are expected to fall month-on-month in July.
Aluminium foil: The average operating rate of large aluminium foil enterprises remained at 81.4% this week. There was still no sign of improvement in the order situation in the aluminium foil market, and downstream customers remained cautious in placing orders. The number of confirmed COVID cases in Jiangsu increased slightly, but this has not affected the normal production of surrounding aluminium foil enterprises. Given the slow recovery of demand, the operating rates of large aluminium foil enterprises may face downside risks.
Secondary aluminium alloy: The average operating rate of large secondary aluminium alloy enterprises dropped 0.7 percentage point to 48.1% this week. The prices of ADC12 secondary aluminium alloy plummeted 600 yuan/mt this week as a result of mounting inventory pressure of producers and sell-off by traders, as well as a slump in aluminium prices. Secondary aluminium plants struggled to break even. Downstream die-casting plants reduced their purchases due to poor orders and falling market prices, resulting in a decline in the operating rates of secondary aluminium plants. As the off-season is drawing near, the operating rates are unlikely to pick up.
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