Multiple Factors Exert Pressure as Operating Rate of Aluminum Wire and Cable Declines Further, Dragging Overall Operating Rate Downward [SMM Weekly Downstream Survey]

SMM, December 27, 2024: This week, the operating rate of leading downstream aluminum processing enterprises in China continued to decline, down 1.2 percentage points WoW to 61.1%. Most sectors saw a decrease in operating rates this week. Specifically, the aluminum wire and cable sector experienced a significant drop, mainly due to the suspension of power grid construction in north China caused by cold weather, leading to weaker shipments. Coupled with year-end payment collection demands, the operating rate of aluminum wire and cable enterprises faced downward pressure. The aluminum plate/sheet and strip sector recorded the second-largest decline, primarily impacted by environmental protection inspections. Operating rates in the aluminum extrusion sector showed mixed performance; industrial extrusion orders remained moderate, while future PV production schedules continued to weaken, causing a noticeable pullback in operating rates among leading suppliers, who may start planning for holidays. The secondary alloy sector remained constrained by raw material shortages and environmental protection-related controls, with operating rates fluctuating downward. Operating levels in the primary aluminum alloy and aluminum foil sectors remained relatively stable. Overall, downstream aluminum demand continued to weaken, and the impact of environmental protection persisted. Due to insufficient orders, some enterprises are expected to suspend production after New Year's Day, entering the Chinese New Year holiday early. Downstream aluminum operating rates are expected to continue declining. Primary Aluminum Alloy: This week, the operating rate in the primary aluminum alloy sector remained at 55%. The market continued to operate steadily, with leading enterprises maintaining stable production to fulfill liquid aluminum alloying tasks. Aluminum prices fell continuously during the week, and bearish sentiment prevailed in the market. Some enterprises reported that downstream customers were not actively picking up goods, but this did not disrupt production among alloy enterprises. Unless aluminum production cuts occur, the operating rate in the primary aluminum alloy sector is expected to remain stable. Aluminum Plate/Sheet and Strip: This week, the operating rate of leading aluminum plate/sheet and strip enterprises fell by 2.0 percentage points to 67%. While some leading enterprises maintained relatively sufficient orders on hand, environmental protection inspections impacted operating rates, leading to a slight decline this week. By Friday, some enterprises reported that the impact of environmental protection-driven production restrictions had eased. Whether environmental protection inspections will recur in the short term remains the biggest uncertainty for the aluminum plate/sheet and strip market. Aluminum Wire and Cable: This week, the operating rate of leading domestic aluminum wire enterprises recorded 68%, down 3.8% MoM. As December entered its mid-to-late period, cold weather in north China caused a suspension of power grid construction, leading to weaker shipments in the aluminum wire and cable industry. Combined with year-end payment collection demands, these factors exerted downward pressure on the operating rate of aluminum wire and cable enterprises. Although the State Grid's urgent delivery orders have temporarily concluded, strong demand in the aluminum enamelled wire sector in south China, driven by a "rush for exports," has kept operating rates resilient, making it one of the better-performing sub-sectors. SMM expects that with the approach of the Chinese New Year, aluminum wire and cable manufacturers in north China may be the first to cut production and take holidays due to distant delivery dates for pending orders. In contrast, power grid construction in south China may remain unaffected, and urgent orders from the home appliance sector will help maintain stable operations. Despite significant regional differences, the impact of the year-end off-season on demand is inevitable, and the aluminum wire and cable industry's operating rate is expected to fluctuate downward. Aluminum Extrusion: This week, the operating rate of domestic aluminum extrusion enterprises showed mixed performance but overall reflected a downward trend typical of the off-season, recording 47.10%, down 0.90 percentage points WoW. SMM learned that operating rates in south China saw slight increases, mainly due to some previously delayed orders being placed after aluminum prices fell below 20,000 yuan, as well as orders for bathroom products. Automotive extrusion orders remained moderate in the industrial extrusion segment. Operating rates varied significantly in other regions; some enterprises saw increases as they began fulfilling orders on hand after focusing on payment collection earlier, while most enterprises maintained stable operating rates. Notably, future PV production schedules continued to weaken, leading to a noticeable pullback in operating rates among leading suppliers, who may start planning for holidays. Overall, with aluminum prices at low levels, downstream demand remains primarily need-based, and operating rates are unlikely to improve significantly during the off-season. Aluminum Foil: This week, the operating rate of leading aluminum foil enterprises remained unchanged at 74.7%. The aluminum foil market remained calm, with most enterprises still operating at low levels due to insufficient demand. Short-term demand recovery appears unlikely, and operating rates in the aluminum foil sector are expected to decline gradually in the coming weeks. Secondary Aluminum Alloy: This week, the operating rate of leading secondary aluminum enterprises fell by 0.6 percentage points WoW to 55.0%, mainly due to raw material shortages and environmental factors. To meet order deliveries and stocking demand before the Chinese New Year, secondary aluminum plants actively sought raw materials in the market. However, insufficient aluminum scrap supply and low selling sentiment among traders due to falling prices made raw material procurement challenging, disrupting the operating rhythm of some enterprises. Additionally, heating season or orange alert warnings in provinces such as Henan and Sichuan have pressured secondary aluminum plants to cut or suspend production. In the short term, the operating rate of leading secondary aluminum enterprises is likely to continue weakening. 》Click to View the SMM Aluminum Industry Chain Database (SMM Aluminum Team)