Traditional peak season saw a significant recovery in the aluminum processing industry. In September, China's aluminum processing PMI increased by 18.1% MoM! [SMM Downstream In-depth Analysis]

SMM, Oct 8: According to SMM data, in September 2024, the comprehensive PMI index for China's aluminum processing industry recorded 61.7%, up 18.1 percentage points MoM, marking the first return above the 50 mark since May. Looking at different sectors, the PMIs for aluminum plate/sheet and strip, aluminum foil, industrial aluminum extrusion, primary aluminum alloy, and secondary aluminum alloy all recorded above 60, indicating a clear expansion territory. Aluminum wire and cable remained largely stable near the 50 mark, while construction aluminum extrusion continued to be weak, staying below the 50 mark.

In terms of specific indicators, entering the traditional consumption peak season in September, demand for industrial extrusion in photovoltaics, automotive, and 3C improved. Meanwhile, production of various aluminum foil products such as air-conditioner foil, battery foil, and packaging foil increased MoM. Additionally, production of aluminum plate/sheet and strip, primary aluminum alloy, and secondary aluminum alloy rose due to the recovery in demand, pushing the production index up 33.3% MoM to 69.5%, and the new orders index up 31.4% MoM to 71.5%.

By product type:

Aluminum plate/sheet and strip: In September, the PMI for the aluminum plate/sheet and strip industry was 72.9%, up 34.4 points MoM. Entering the consumption peak season, many sample enterprises reported increases in orders on hand and production, with strong expectations for aluminum price hikes at the end of September and urgent stocking needs for the National Day holiday. Many aluminum plate/sheet and strip enterprises that did not stop production during the holiday increased their raw material inventories. These factors collectively drove a significant MoM increase in the PMI for the aluminum plate/sheet and strip industry in September. October, also a traditional peak season, is expected to see continued growth in orders and production compared to September, with the PMI expected to remain above the 50 mark, though it may decline MoM.

Aluminum foil: In September, the PMI for the aluminum foil industry was 71.5%, up 37.6 points MoM. Orders and production for various aluminum foil products such as air-conditioner foil, battery foil, and packaging foil increased MoM. At the end of September, market sentiment was bullish on aluminum prices, and many enterprises that did not stop production during the National Day holiday actively stocked up, leading to higher raw material inventories. In October, traditional peak season orders are expected to continue growing, but some sample enterprises are concerned about an early arrival of the off-season, with mixed optimistic and pessimistic expectations. The industry PMI is expected to be around 50.

Construction extrusion: In September, the comprehensive PMI index for construction aluminum extrusion recorded 47.73%, remaining below the 50 mark. According to an SMM survey, most construction aluminum extrusion companies reported largely stable production compared to August, with some receiving export orders for railings, slightly increasing the operating rate in September. The production index recorded 43.93%, the new orders index 48.60%, and the new export orders index rose above the 50 mark to 50.92%. Approaching the National Day holiday, most companies plan to halt production for 3-5 days, and with recent high aluminum prices, downstream stocking willingness is low, keeping the raw material inventory index below the 50 mark. Overall, demand for construction extrusion remains weak, with companies holding a pessimistic outlook for the future, expecting the comprehensive PMI for construction aluminum extrusion to remain below the 50 mark in October.

Industrial extrusion: In September, the comprehensive PMI index for the industrial aluminum extrusion industry recorded 65.82%, remaining above the 50 mark. By sub-index, demand for photovoltaic, automotive, and 3C extrusion showed improvement in September, with companies reporting MoM growth in orders compared to August. Consequently, the production index and new orders index both rose significantly above 70%. However, from a profitability perspective, processing fees for photovoltaic and automotive extrusion faced cut-throat competition, and long payment terms led many companies to report losses. Additionally, considering orders on hand, companies stocked up slightly before the National Day holiday, with the raw material inventory index rising to 61.56%. Overall, the demand recovery trend for industrial extrusion in September-October is evident, with the comprehensive PMI for industrial extrusion expected to remain above the 50 mark in October.

Aluminum wire and cable: In September, the comprehensive PMI index for the domestic aluminum wire and cable industry recorded 50.1%, staying above the 50 mark. During the traditional consumption peak season in September, the overall shipment volume for the aluminum wire industry remained stable, with top-tier enterprises operating at high levels. However, small and medium-sized enterprises saw a decline in operating rates due to the impact of order profitability, with the overall production index recording 51.36%, up 2.7% MoM. Currently, orders on hand are relatively full, with increases in orders for conductors and new energy photovoltaic and wind power, except for sporadic orders from the State Grid. The overall increase was less than in August, with the new orders index recording 49.61%, below the 50 mark. Regarding finished product inventory, due to rising aluminum prices, companies showed renewed caution, with insufficient willingness to stock, resulting in a purchasing volume index of 49.69% and an inventory index of 47.67%. Overall, top-tier enterprises plan to continue production during the National Day holiday due to full production schedules, while some small and medium-sized enterprises plan to take a break due to non-urgent order deliveries. The operating rate for aluminum wire is expected to weaken in October, with a risk of the PMI falling below the 50 mark.

Primary alloy: In September, the PMI for primary aluminum alloy was 63.0%, up 12.3 points MoM. Entering the traditional peak season for the primary aluminum alloy industry in September, market performance was still less than ideal. Some primary aluminum alloy companies reported no significant changes in various data compared to August, although some reported increased orders, which were insufficient to drive a significant MoM increase in the industry PMI. Both September and October are traditional peak seasons, with few companies expecting further growth in production and sales in October, and the industry PMI may fall below the 50 mark.

Secondary alloy: In September, the PMI for the secondary aluminum industry rose above the 50 mark, up 14.8 percentage points MoM to 62.3. After mid-August, the long-depressed downstream demand began to improve and continued into September, boosting orders and operating rates for secondary aluminum plants. However, the "September peak season" expectations were largely unmet, with limited overall recovery. Additionally, the tight circulation of aluminum scrap remained unresolved. To meet order deliveries and National Day holiday stocking needs, secondary aluminum plants actively procured materials, but raw material inventory levels did not significantly increase, and some companies' production was constrained by material shortages, limiting recovery. Entering October, the PMI for the secondary aluminum industry may fall back to around the 50 mark due to the impact of the National Day holiday.

Brief Comment: By the end of September, aluminum prices returned above 20,000 yuan/mt, with orders and production in most downstream sectors recovering, and processing enterprises' PMI returning above the 50 mark, indicating a clear peak season trend for the overall industry. However, growth in some sectors was below expectations, and the construction aluminum extrusion sector showed little growth, with the traditional consumption peak season providing limited support for some downstream sectors. October remains a traditional consumption peak season, with the industrial aluminum extrusion and aluminum plate/sheet and strip industries expected to continue contributing to downstream consumption growth. However, overseas orders showed some decline, and the sustainability of industry consumption growth remains to be seen. Considering industry orders and production schedules, SMM expects the domestic aluminum processing industry PMI to remain above the 50 mark in October.