Operating Rates of Molten Aluminium Casting Billet Enterprises Continued to Fall in July amid Sharp Decline in Orders

SHANGHAI, Aug 15 (SMM) - According to SMM survey, the average operating rate of domestic molten aluminium casting billet enterprises stood at 71.3% in July, down 0.99 percentage point from June, marking two consecutive months of decline. 
In terms of different regions, the operating rates rose in north China, and were flat in central and south China, but fell across east, north-west and south-west China. Some enterprises in Inner Mongolia returned to normal production last month following maintenance in June. In addition, the recovery of molten aluminium supply also contributed to the rise of operating rates in north China. In July, the average operating rate of downstream aluminium extruders fell as much as 5.6 percentage points month-on-month, with construction and industrial extruders both recording declines. The construction extrusion sector, in particular, was quite sluggish, leading to output cuts by some aluminium billet producers in south-west and north-west China. Aluminium smelters and aluminium billet producers in Sichuan slashed their output significantly amid the power rationing. 
In early August, an accident occurred to an aluminium smelter in Sichuan, affecting 190,000 mt of aluminium capacity and 40,000 mt of aluminium billet capacity. As a result, the operating rates of local aluminium billet producers may decline further in August. SMM will keep a close eye on the local power rationing policy and possible resumption of production.
As the settlement of molten aluminium is primarily based on the monthly average prices of aluminium ingots, the decline in aluminium prices in July prompted smelters to raise their proportion of molten aluminium output. The overall supply of aluminium billets was abundant. 
In view of the sluggish downstream operating rates, the in-plant and social inventory of aluminium billets may continue to accumulate. Aluminium billet conversion margins have lacked upward momentum across the country recently. Many aluminium billet producers told SMM that they will lower their output this month if downstream purchases do not improve significantly. SMM predicts that the operating rates of aluminium billet enterprises will extend the slight decline into August, but the overall supply will remain plentiful. The market shall closely watch the operating rates of downstream extruders, as well as the performance of real estate and infrastructure sectors.