Aluminium Processing Enterprises React Differently to China’s Relaxations of COVID Restrictions

SHANGHAI, Dec 16 (SMM) - Since China loosened its pandemic controls in early December, a growing number of people have been infected with COVID-19. SMM surveyed some of the aluminium billet foundries and aluminium extruders across Shandong, Hebei, Henan, Jiangxi, and Guangdong provinces on their attitude towards the relaxation of COVID restrictions. A majority of them said that the pandemic broke out rapidly and some production staff were on sick leave after being infected with the virus, leading to vacancies in shift work and slightly affecting their production. In response to the unstable market conditions, a small number of aluminium billet foundries and aluminium extruders were planning to close in mid-to-late December for the upcoming Chinese New Year after using up their raw material inventories and clearing their finished product inventories. 

With the Chinese New Year approaching, aluminium smelters raised the proportion of their ingots. Many billet foundries who use molten aluminium as raw materials will barely hold any inventory, unless downstream enterprises place orders and lock in prices in advance. Secondary aluminium billet foundries were cautious about buying aluminium scrap and maintained merely 3-5 days of inventories. 

Market opinions were split over the market outlook after China eased its COVID restrictions.  Some enterprises were optimistic over the economic recovery, adding that the increase in COVID infections would only be temporary. The orders for aluminium billets and extrusion were moderate on December 15. A series of policies that were introduced in November and December to revive the pandemic-battered Chinese economy may not have a substantial impact on year-end orders, but will definitely shore up the demand next year. Some aluminium billet foundries and aluminium extruders planned to close in early January for the Chinese New Year.  

Yet, some market players see no turnaround in the downstream consumption for the rest of the year and hold a cautious attitude towards the aluminium market outlook in February and March next year. The unusual decline in aluminium extrusion exports in the fourth quarter reflected poor demand.