SHANGHAI, Aug 11 (SMM) - According to SMM survey, the average operating rate of domestic aluminium billet producers declined for two months in a row to 71.3% in July, down 0.99 percentage point month-on-month. The operating rate in north China increased, and that in central and south China remained flat as a whole. However, the operating rates in east China, north-west China, and southwest China all decreased month-on-month.
SMM survey shows that the production of aluminium billets returned to normal in Inner Mongolia as the production lines of some aluminium billet plants that had been suspended for maintenance in June resumed the production in July. In addition, some aluminium billet plants had limited supply of molten aluminium in May and June due to the cooperation with aluminium smelters. Yet the supply recovered in July, which boost the operating rate of local aluminium billet producers. In July, the operating rate of downstream extruders slumped with a month-on-month decrease of 5.6%. Specifically, the operating rates of construction and industrial extruders both declined, which had an impact on the aluminium billet plants. Some aluminium billet plants in south-west and north-west China reduced the production. In Sichuan, due to the power rationing, local aluminium smelters and aluminium billet plants cut the production significantly, driving the average operating rate to decline. In early August, there was an accident in an aluminium smelter in Sichuan, affecting the production capacity of 190,000 mt of aluminium and 40,000 mt of aluminium billets. The operating rate of aluminium billet producers fell further in August. SMM will keep a close eye on the local power rationing policy and the resumption of production of related enterprises.
Since the aluminium liquid is mostly traded at the monthly average price, outsourcing the aluminium liquid was more profitable than using it to manufacture the aluminium ingots amid the falling aluminium prices in July. Therefore, the proportion of aluminium liquid in the production of aluminium smelters in July increased accordingly. The overall supply of aluminium billets was sufficient. As the operating rate of downstream extruders remained sluggish, the in-plant inventory and social inventory of aluminium billets may continue to accumulate. The conversion margins of aluminium billets in the market were still suppressed recently, which lacked momentum of growth across the country with poor trades. Many enterprises said that if there is no significant improvement in the downstream orders in August, they will consider cutting the output of aluminium billets. Therefore, it is expected that the operating rate of aluminium billet enterprises may continue to decline slightly in August, but the overall supply will be abundant. SMM will pay attention to the operating rates of downstream extruders as well as the development of real estate, infrastructure and other fields in the second half of the year.