Operating Rates of Aluminium Wire and Cable Decline Slightly on the Month as the Demand from Photovoltaics and Power Grid did not Increase Significantly

SHANGHAI, July 14 (SMM) - According to SMM survey, the operating rates in the aluminium wire and cable sector stood at 40.57% in June, down 0.48% on the month and up 0.21% on the year. The operating rates at large producers rose 2% month on month to 53.3%, and that at medium-scale producers decreased by 2.53% MoM to 33.62%, and that at small producers stabilised.

In June, the operating rates of domestic aluminium wire and cable slightly declined on the month. The operating rates at small and medium-scale producers were unlikely to increase amid the poor order volume. The operating rates at large producers increased amid the relatively stable order volume. Aluminium prices fell sharply in June and State Grid and wire and cable companies hold a negative attitude on the future aluminium prices. In this case, companies are not willing to place orders, hence new orders are few. Large companies have a large backlog of orders. Therefore, the follow-up output will be high. However, the operating rates at small and medium-sized enterprises has obviously declined.

In terms of regions, as the domestic pandemic eased significantly in June, the operating rates in Jiangsu, Zhejiang and Shanghai areas improved, and the enterprises mainly produced on orders. Therefore, the inventory of finished products decreased. However, Danjiang and some north-east regions were still affected by the pandemic, hence the operating rates fell. In the north-west region, the demand for new energy off-grid was relatively good, and enterprises produced actively. In south-west and south China, new orders were still poor, hence enterprises were unwilling to produce

In terms of products, domestic aluminium wire and cable orders in June were mainly for UHV and rural power grid transformation. Some companies' photovoltaic and power grid orders increased, but the general increase was not obvious. There are some technical difficulties and industry barriers needed to be overcame, but it is believed that aluminium alloy wires and cables will be more widely used in photovoltaic and power grid in the future with lower cost, lighter weight, and better capacity.

From the perspective of cost, the direct purchase cost of copper is 30% higher than that of aluminium alloy. As the cost of aluminium alloy cable is about 40%-75% lower than that of cable made by copper, the aluminium alloy cable has more cost advantage.

In terms of overseas orders, according to customs data, the total export volume of domestic aluminium wire and cable in May was 19,800 mt, an increase of 90.2% month-on-month and an increase of 18.8% year-on-year. The surge in total exports in May was mainly because the domestic delayed orders in April were shipped in May. In addition, as domestic and overseas aluminium prices fell sharply, the demand from overseas increased. It is expected that follow-up export orders will increase stably.

SMM Brief Analysis: In July, aluminium prices declines, hence the new order volume was modest amid the wait-and-see sentiment, especially at small and medium-sized enterprises. In addition, the operating rates are affected by the high temperature and off-season. At the same time, the delivery of State Grid is concentrated at the end of August and September, which also affected the operating rates in July. It is expected that the operating rates of domestic aluminium wire and cable will remain stable at around 41% in July.