SHANGHAI, Aug 8 (SMM) –
Here is a review of supply-and-demand of aluminium rods in June. In terms of supply, SMM investigated the operational rates and production of major aluminium rod manufacturers in China during the off-season. 86 manufacturers were selected, from East China (Shandong, Jiangsu), North China (Henan, Inner Mongolia) as well as Guangxi, Yunnan, Guizhou, and Sichuan.
Investigation shows that the national output of aluminium rods in June 2023 (30 days) was 352,700 mt, down 4,100 mt and 1.15% from May (31 days). The operating rate in June was 60.67%, down 0.71% from 61.38% in May, essentially holding steady. Investigation also shows that the operation resumption and ramping up of capacity are gaining momentum. SMM forecasts that there will be room for further increases in aluminium rod supply in H2 2023.
Demand in June has fallen from the peak season of March and April and market sentiment was subdued. According to SMM, a surplus of finished aluminium rods exists in factories. This oversupply led to a continual fall in conversion margins in June. Post Dragon Boat Festival, manufacturers cut conversion margins to stimulate sales and reduce stock. This resulted in consecutive daily decreases in aluminium rod conversion margins.
The following price changes were observed in June. In Shandong, the conversion margin was between 250-400 yuan/mt, with an average monthly price of 325 yuan/mt, down 158 yuan/mt MoM. Leading local manufacturers frequently lowered their quotations. In Inner Mongolia, the conversion margin was between 100-350 yuan/mt, with an average monthly price near 194 yuan/mt, down by 195 yuan/mt MoM. Inner Mongolia experienced the largest decline in June. In Henan, the conversion margins fluctuated between 350-400 yuan/mt, with an average monthly price of around 383 yuan/mt, down 106 yuan/mt MoM. In Guangdong, aluminium billet conversion margins ranged between 550-650 yuan/mt, with an average monthly price of around 578 yuan/mt, down 107 yuan/mt MoM. Spot supply is plentiful, and goods can be picked up on the same day.
Aluminium rod conversion margins are rebounding late July after a slump. Aluminium prices have surged since mid-July. Downstream resistance to high prices hasn't curbed rigid demand, thereby pushing aluminium rod manufacturers to hike prices. Aluminium rod conversion margins have seen two upward adjustments this week due to bullish forecasts.
In the middle of this week, aluminium rod conversion margins have been adjusted upwards. In Shandong, 1A60 aluminium rod conversion margin was 300-400 yuan/mt, averaged at 350 yuan/mt, up 50 yuan/mt. In Henan, 1A60 aluminium rod conversion margin was 300-400 yuan/mt, quoted at 350 yuan/mt, showing no big changes. In Inner Mongolia, 1A60 aluminium rod conversion margin was between 200-250 yuan/mt, quoted at 225 yuan/mt, up by 25 yuan/mt. In South China, the conversion margin has increased by 50 yuan/mt. 1A60 aluminium rod conversion margin ranged from 600-700 yuan/mt, averaged at 650 yuan/mt, with limited supply of low-priced products.
SMM research reveals a slight dip in the operating rate of top aluminium wire and cable producers to 57.8% in early July, from June's 58.5% and last week's 58.2%. Despite the off-season, the rate remained steady. While an off-season dip is inevitable, South China outperforms North China.
The supply of aluminium rods has almost fully recovered, with varying order intake of aluminium rod producers and adjusted conversion margins. Previously halted producers in Henan are restarting, albeit slowly, due to a previous oversupply. Most producers, awash with stocks, can facilitate immediate pick-ups. A few have managed to reduce their inventory.
Amid the off-peak, the aluminium rod market saw a decline in demand. The market has to wait for peak season in Q4 to see active buying.
Overall, late July sees the aluminium rod market in its off-season, facing sluggish demand. Manufacturers' unsold stock has led to supply outstripping demand. However, a rise in rigid demand-led purchases has begun to lift conversion margins. SMM forecasts limited fluctuations in conversion margins throughout Q3.
Aluminium rod conversion margins by region (yuan/mt)
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