The operating rate of domestic aluminium wire and cable industry slightly declined in May [SMM Analysis]

According to the SMM survey, the operating rate of the domestic aluminum wire and cable industry in May 2024 decreased by 0.38% MoM to 53.88%, up 6.12 percentage points YoY. Large enterprises continued to perform steadily in May, with the operating rate rising by 2.58% MoM to 60.34%. However, the operating rates of medium and small enterprises showed a decline. The operating rate of medium-sized enterprises fell by 1.77% MoM to 55.11%, and that of small enterprises dropped by 6.35% to 25.8%. Although May is a peak season for the aluminum wire industry, the overall operating rate slightly declined due to the varying trends in the operating rates of enterprises of different scales.

In terms of enterprise types, medium and large enterprises had ample orders on hand. Amid tight industry deliveries, the operating rates of larger enterprises continued to rise, and these enterprises tend to hedge, making aluminum prices have limited impact on their operating rates. On the other hand, some medium-sized and small enterprises were severely affected by rising aluminum prices, which significantly damaged the profitability of their orders on hand, leading to situations where they produced at a loss. Their production enthusiasm was severely lacking, and they mainly engaged in production based on rigid demand while maintaining a wait-and-see attitude.

Regarding procurement, aluminum prices in May remained strong, once again breaking previous highs and then consolidating at high levels. Leading producers, due to their large shipment volumes and production scales, were not affected in terms of overall procurement. However, small and medium-sized producers, due to the continuous rise in aluminum prices, still showed insufficient willingness to procure. Both raw material inventories and finished product inventories remained at low levels, attempting to avoid the risk of a significant drop in aluminum prices.

Regarding orders, new orders from the power grid were significant this month. Orders for State Grid transmission and transformation, as well as distribution network agreement orders from provincial grids, were all finalized. Together with the continuous efforts in photovoltaic and wind power projects, industry orders were quite abundant. According to feedback from leading producers, most of the scheduled production for aluminum wire has already extended to next year, and production will remain at full capacity until August.

In terms of exports, in April 2024, aluminum wire and cable exports reached 19,000 mt, up 40% MoM and 21.1% YoY. The total export value of aluminum wire and cable in April was $57.56 million, up 27.7% MoM and 16.8% YoY. From January to April 2024, the total export volume of aluminum wire and cable was 71,400 mt, compared to 60,700 mt in the same period of 2023, up 17.6% YoY.

SMM Brief Analysis: From January to April 2024, the total investment in power grid projects reached 122.9 billion yuan, up 24.9% YoY, showing a positive trend in overall power grid construction. Although the operating rate of aluminum wire and cable in May showed a slight decline overall, the operating rate of leading companies remained strong, while some small and medium-sized enterprises were more sensitive to aluminum prices. Based on the performance of State Grid orders, the delivery volume of aluminum wire and cable in June is expected to stabilize, while aluminum prices in June are showing an adjustment trend. End-user orders may further increase. Considering the current orders and scheduled production plans of companies, SMM expects the operating rate in June to stabilize, with the operating rate of small and medium-sized enterprises gradually recovering.