Transition from Peak to Off-Season: October Aluminum Processing PMI Moderate, Expected to Fall Below the 50 Mark in November [SMM Downstream In-depth Analysis]

SMM, October 31, 2024: According to SMM data, the comprehensive PMI index for the domestic aluminum processing industry in October 2024 recorded 53.9%, above the 50 mark.

By product type:
Aluminum plate/sheet and strip: The PMI for the aluminum plate/sheet and strip industry in October was 57.7%, down 15.2 points MoM. Both October and September are traditional peak seasons, with some enterprises reporting increased orders and production compared to September. Although there was a slight weakness at the end of the month, the overall monthly data remained higher than in September. At the end of October, Henan, a major province for aluminum plate/sheet and strip, faced environmental protection inspections, leading some enterprises to reduce their operating rates, but the reduction was minimal and is not expected to significantly impact the industry. With the arrival of the traditional off-season in November, many enterprises expect a decline in production and sales MoM, with the PMI expected to fall below the 50 mark.

Aluminum foil: The PMI for the aluminum foil industry in October was 57.8%, down 13.7 points MoM. October remained a traditional peak season with ample orders. However, some sample enterprises saw an increase in product inventory at the end of October due to active downstream shipments at the end of September to meet production tasks for the National Day holiday. These factors kept the industry PMI above the 50 mark. With the transition to the traditional off-season in November, a decline in demand and production is inevitable, and the industry PMI is expected to fall below the 50 mark.

Construction aluminum extrusion: The comprehensive PMI index for the construction aluminum extrusion industry in October recorded 49.53%, still around the 50 mark. According to the SMM survey, some construction aluminum extrusion enterprises in South China, Anhui, and Shandong received orders for urban investment projects like "guaranteed delivery of buildings," leading to a rise in operating rates. The production index for the month recorded 51.84%, and new orders were 51.18%. However, this could not conceal the weak industry demand, with fierce competition and some enterprises offering volume discounts, leading to employee turnover. The employment index for the month recorded 43.67%. Additionally, due to environmental inspections at the end of the month in Shandong and other regions, the aluminum processing industry experienced production halts and reductions, which are expected to continue until mid-November. Therefore, the PMI for construction aluminum extrusion is expected to continue declining next month.

Industrial extrusion: The comprehensive PMI index for the industrial extrusion industry in October recorded 52.92%, remaining above the 50 mark. By sub-index, downstream demand for industrial extrusion was stable in October, with some enterprises receiving new orders. The production index for the month recorded 55.31%, and the new orders index recorded 55.31%. According to the SMM survey, some enterprises received new orders from Japan and South Korea, but orders from traditional export countries like Vietnam declined significantly due to increased anti-dumping measures. Additionally, the production schedule for components in November is expected to decrease slightly, which may affect the operating rates of downstream suppliers. However, current orders on hand indicate no significant decline in November, and the comprehensive PMI for industrial extrusion is expected to remain above the 50 mark.

Aluminum wire and cable: The comprehensive PMI index for the domestic aluminum wire and cable industry in October recorded 53.4%, remaining above the 50 mark, indicating the industry is still in expansion territory. After the "September peak season," entering the "October peak season," top-tier enterprises in the aluminum wire and cable industry had heavy production tasks due to the need to deliver ultra-high voltage orders by the end of the month, maintaining high operating rates. However, the operating conditions for small and medium-sized enterprises were not optimistic, lowering the industry's operating rate, with the production index recording 47.91%. In terms of new orders, provincial network bidding orders were announced in October, with the new orders index recording 61.9%, indicating that production orders were relatively saturated, with new orders scheduled for delivery in the first quarter of next year. Regarding finished product inventories, enterprises need to continue delivering other orders after completing ultra-high voltage orders, and export orders tend to be delivered in batches, leading to an increase in finished product inventories, with the finished product inventory index recording 60.16%. Overall, the operating rate and order status of the aluminum wire industry have been exceptionally strong this year, with enterprises indicating that production plans are saturated until year-end. However, considering the impact of fluctuating aluminum prices on the profitability of small and medium-sized enterprises' orders and the reduction in industry delivery volumes due to the suspension of power grid construction in winter, the PMI index for aluminum wire in November is expected to remain around the 50 mark.

Primary aluminum alloy: The PMI for the primary aluminum alloy industry in October was 47.6%, down 15.4 points MoM. Both October and September are traditional peak seasons, with most enterprises reporting stable overall conditions compared to September. However, some enterprises felt that the off-season arrived early in late October, with orders starting to decrease, resulting in the industry PMI falling below the 50 mark. With the arrival of the off-season in November, enterprises generally expect a decline in orders, with the PMI expected to continue running below the 50 mark.

Secondary aluminum: The PMI for the secondary aluminum industry in October continued to remain above the 50 mark, down 2.5 points MoM to 59.8. Operating rates for secondary aluminum enterprises varied in October, with about half of the enterprises indicating stable demand and no significant increase in new orders, maintaining operating rates similar to September. Thirty percent of enterprises increased production, mainly driven by improved automotive demand and the push to meet annual production targets in the fourth quarter. The remaining enterprises saw a decline in operating rates due to the extended National Day holiday, high production costs limiting profit margins, and high aluminum prices reducing downstream purchase willingness. The PMI for secondary aluminum in November is expected to fall to around the 50 mark.

Brief Comment:
Driven by peak season demand in September and October, the PMI for aluminum processing enterprises increased. As the transition to the traditional off-season occurs in November, enterprises generally report a decrease in orders on hand. Coupled with fluctuating aluminum prices, end-use purchase enthusiasm is weakening, and the PMI for aluminum processing in November is expected to fall below the 50 mark.