Due to the CNY holiday in February and the maintenance of production lines by some manufacturers, the supply of aluminum rods declined. In January 2024, the existing domestic aluminum rod capacity was 7.30 million mt. In February (29 days), the domestic aluminum rod production totalled 318,000 mt, down 51,000 mt or 13.80% MoM. The operating rate of aluminum rod was 52.3% in February, down 8.40% MoM. In February, due to the CNY holiday and the maintenance of production lines by some manufacturers, the supply of aluminum rods fell back. After the holiday, the inventory pressure of aluminum rod manufacturers across the country is high. The demand from domestic downstream wire and cable companies is concentrated on leading companies. The new orders in the industry are lower than expected. We are cautious about whether the downstream industry can recover smoothly. According to SMM research, there is new production capacity on the aluminum rod supply. After a company in Henan solved the problem of aluminum liquid supply, new production capacity will be launched in March, involving an annual production capacity of 72,000 mt.
On the demand, in February, very few leading companies maintained stable operation during the CNY holidays, while most companies entered the holiday as scheduled, resulting in a weakening of the industry's operating rate. After the CNY holiday, enterprises in Jiangsu and Zhejiang took the lead in resuming work. Due to the late resumption of work by upstream manufacturers after the CNY, raw material inventory was insufficient, and the output in February was slightly lower than expected.
In March, the intensive delivery officially begins, which may last until the end of June. During this period, the operating rates of medium and large enterprises with abundant orders on hand may remain high. In contrast with leading companies, small and medium-sized enterprises have fewer new orders after CNY, coupled with the gradual rise in aluminum prices, their enthusiasm for production was poor
In terms of processing fees, during February, the ex-factory processing fee for series 1-series general rods in Shandong was 350 yuan/mt-500 yuan/mt, and the average ex-factory processing fee was 425 yuan/mt, an increase of 65 yuan/mt from January; the ex-factory processing fee in Henan was 400 yuan/mt -450 yuan/mt, the average processing fee was 410 yuan/mt; the ex-factory processing fee of general rod processing fees in Inner Mongolia was between 150 yuan/mt and 250 yuan/mt, with an average of 206 yuan/mt, an increase of 56 yuan/mt from the previous month; in Guangdong, the processing fee was between 450 -500 yuan/mt, with an average of 487 yuan/m. During the CNY, due to the normal supply of aluminum liquid, aluminum rod manufacturers aimed to maintain production with the goal of increasing inventory, resulting in greater pressure on aluminum rod inventory. At the same time, leading aluminum rod companies are willing to raise premiums further, but due to inventory pressure, the actual transaction price is lower than the quoted price. In addition, the recovery of downstream orders after the holiday is less than expected, and the main demand is concentrated in large downstream manufacturers. Small and medium-sized enterprises are more sensitive to the price of raw materials due to different procurement models. Aluminum prices were high after the holiday, and companies were not willing to receive goods amid muted market.
In the traditional peak consumption season in March, the supply of aluminum rods may return to normal. Aluminum rod production is expected to rebound in March. Leading companies are operating stably. The operating rate of small and medium-sized enterprises is expected to recover. However, pressure on aluminum rod inventory still exists, the downstream recovery progress is relatively slow, and SMM expects aluminum rod processing fees to remain stable in March.
