Production resumptions of aluminum processing companies after Spring Festival [SMM Survey]

SHANGHAI, February 28 (SMM) –Last week, the operating rate of leading domestic aluminum downstream processing companies rebounded by 4.2 percentage points from pre-holiday to 55.5%. After Spring Festival, except for plate/sheet, strip and foil and primary aluminium alloys which did not stop production, other sectors gradually resumed production. Among them, secondary aluminum alloy saw the operating rate rebounded significantly as large factories concentrated on resuming work from Feb 15 to Feb 17. However, due to factors such as insufficient market demand, the operating rate of enterprises has not yet returned to normal levels. In addition, driven by photovoltaic aluminium extrusion, the aluminium extrusion sector's operating rate rose sharply by 8 percentage points. However, due to real estate downturn coupled with cold wave, downstream projects were delayed in resuming work. It is expected that the industry will fully recover and increase until March. The wires and cables sector's operating rate has also risen due to the resumption of work, but there has been no significant improvement in new orders, restricting the growth of output.

Overall, aluminum processing companies gradually resumed production after the holidays, but the market sentiment was weak in the first week, and low temperature and snowfall affected the transportation of goods and the return of employees. The overall pace of production resumption was slightly slower. As upstream and downstream companies gradually completed the resumption of work, the operating rate increased and gradually returned to normal levels. The traditional peak season in March is approaching, when orders may increase significantly.

Primary aluminum alloy

Last week, the operating rate of leading primary aluminum alloy companies was still 49%. In the first week after the Spring Festival, leading primary aluminum alloy companies rarely stopped production for a long time during the Spring Festival. A few companies relaxed their production pace around New Year's Eve, but they have already resumed normal production. However, many downstream customers have been out of production for a long time, the current order volume is very sluggish, and the inventory of finished products that reached a high level during the Spring Festival is not being destocked smoothly. In the future, as the Spring Festival officially ends and the traditional peak season of March enters, the order situation is bound to improve, but it remains to be seen whether the operating rate can be adjusted.

Aluminum plate/sheet and strip

Last week, the operating rate of leading aluminum plate/sheet and strip companies increased by 1 percentage point to 74.4%. The market gradually resumed trading, and inquiries and orders became increasingly active. Although heavy snowfall hit Henan, Shandong and other major provinces last week, which affected transportation efficiency, local companies have rich experience in dealing with snowstorms and have not caused major disruption to business operations. This week will officially break away from the influence of the Spring Festival holiday. It will also enter the traditional peak season in March. Demand is expected to pick up. It is necessary to pay close attention to the changes in the demand to infer the room for increase in the operating rate in the first half of the year.

Aluminum wires and cables

In the first week after the holiday, affected by the resumption of work and production by downstream companies, the operating rate of leading aluminum wires and cables companies increased by 4 percentage points MoM to 58%. During the Spring Festival, some leading companies rushed to work on UHV orders due to post-holiday delivery of finished cables, and maintain normal production without holidays, with stable operating rates; some companies, due to less pressure on order delivery, mostly take holidays according to national holidays and follow plans after the holiday. Work and production have resumed, but since work has just resumed, there has not yet been much improvement in new orders, and the operating rate is insufficient.

In terms of supply, the general rod market was relatively slack last week, with demand concentrated among large manufacturers and weak demand from small and medium-sized enterprises. Coupled with the large fluctuations in aluminum prices during the past week and post-holiday freight increases, companies had a strong wait-and-see mood. Aluminum rod transactions were not optimistic last week.

Aluminum extrusion

Domestic aluminum extrusion companies gradually resumed production in the first week after the new year. Last week, the company's operating rate recorded 42.00%, an increase of 8 percentage points from the last week before the holiday. In terms of sectors, construction aluminium extrusion companies said that demand and production conditions after the holiday this year are worse than in previous years, mainly because the real estate industry remains sluggish, and it will take some time for favorable policies to be transmitted to the construction aluminum extrusion industry; in addition, as not all workers have returned to work after the holiday and cold wave hit again, downstream projects were delayed in resuming work, so the operating rate showed a weak trend. The automotive extrusion sector are operating stably overall; photovoltaic extrusion have resumed work quickly. Most companies saw their operating rates rose rapidly after resuming work and are currently operating at a high level. Overall, domestic aluminum extrusion companies will resume production one after another after the year. Since it will still take some time for downstream demand to be transmitted to extrusion factories, it is expected that the industry will fully recover and see increase in volume until March.

Aluminum foil

Last week, the operating rate of leading aluminum foil companies increased by 0.7 percentage points to 76.3%. As the Spring Festival came to an end last week, most downstream customers of aluminum foil factories resumed production. The order volume of aluminum foil companies has subsequently increased, driving the operating rates of a few leading companies to increase. In terms of products, the highly seasonal air-conditioning foil has the most obvious recovery trend as it is approaching the peak season. Products such as food packaging foil and battery foil are still facing fierce competition due to excess new production capacity in recent years. In the future, as the traditional peak season of March officially enters, the order volume and operating rate are expected to grow.

Secondary aluminum alloy

Last week, the operating rate of leading secondary aluminum alloy companies increased by 12.5 percentage points from pre-holiday to 42.5%, mainly due to the end of the holiday and the resumption of production. Major secondary aluminum alloy plants basically resumed operations from Feb 15 to Feb 17, but the current recovery on the consumer is relatively slow, and the operating rate of downstream die-casting plants is not high. In addition to relatively stable aluminum liquid orders, most aluminium alloy companies reported that only sporadic orders were completed this week. In addition, aluminum scrap traders resumed work later, and due to the rain and snow , the operating rate of secondary aluminum alloy companies has not returned to normal levels, or delayed the start of operations. Later, as the upstream and downstream industries gradually resumed production, the operating rate is expected to continue to rebound this week.