January 4, 2025
This week, aluminum rod processing fees across China trended downward, with the off-season sentiment in downstream sectors becoming increasingly evident and market supply relatively abundant. On the demand side, downstream aluminum wire and cable enterprises showed initial signs of weak shipments, and procurement faced significant resistance. Due to planned production orders, raw material and finished product inventories remained at low levels, and enterprises did not intend to increase inventories before the year-end. As of Friday, the SMM A00 spot price stood at 19,850 yuan/mt, up 120 yuan/mt WoW. The ex-factory average processing fee for Shandong 1A60 ordinary aluminum rods was 350 yuan/mt, down 50 yuan/mt; in Henan, the average processing fee for 1A60 aluminum rods was also 350 yuan/mt, down 50 yuan/mt; in Inner Mongolia, the ex-factory processing fee for 1A60 aluminum rods was 250 yuan/mt, down 50 yuan/mt. The average delivery-to-factory processing fee for ordinary rods in south China was 500 yuan/mt, while the average delivery-to-factory processing fee for 1A60 aluminum rods in Hebei was 400 yuan/mt, and in Jiangsu, it was 500 yuan/mt.
Regarding aluminum rods, as aluminum rod plants need to share part of the liquid aluminum consumption, the overall operating capacity remained high. Northern enterprises generally experienced slight production cuts, while aluminum rod enterprises in south China maintained stable operations, leading to a slight tightening of aluminum rod market supply. According to the SMM survey, aluminum rod manufacturers reported that although January-February is typically an off-season for consumption, there might be concentrated stockpiling demand before the holiday. Currently, manufacturers hold a pessimistic view of post-holiday aluminum billet consumption but remain somewhat optimistic about aluminum rod consumption. As a result, some manufacturers may adopt a strategy of reducing aluminum billet production and increasing aluminum rod finished product inventories to navigate the upcoming off-season trend.
On the demand side, the operating rate of aluminum wire and cable enterprises showed initial signs of weakness, trending downward. Feedback from aluminum wire and cable enterprises indicated that shipment performance in Q1 2025 was not optimistic. Enterprises primarily focused on State Grid orders were also seeking market opportunities and expressed concerns about the production value outlook for 2025. Meanwhile, traders aimed to recover funds by year-end, reducing inventories and prioritizing shipments, with buying sentiment remaining moderate. Overall, the market is shifting towards an oversupply situation, with plant inventories expected to continue accumulating. Future changes in the supply-demand pattern will depend on whether State Grid can accelerate its picking up of goods.
In the downstream aluminum wire and cable sector, the operating rate of leading domestic aluminum wire enterprises this week was 65.6%, down 2.4% MoM. As the year entered its final month, the busy production period for the aluminum wire and cable industry came to a temporary halt, with enterprises reducing production to focus on recovering payments, leading to downward pressure on operating rates. Since the beginning of the year, the number and value of State Grid tenders have fallen short of initial expectations, potentially affecting next year's delivery schedule. The aluminum wire and cable industry's H1 operating performance may fall short of 2024 levels, and enterprises also reported concerns about Q1 order delivery volumes. SMM expects that, given the distant delivery dates for pending production orders, aluminum wire and cable manufacturers in north China may take the lead in cutting production and taking holidays. Meanwhile, raw material and finished product inventories at enterprises are expected to remain at low levels, and the operating rate of the aluminum wire and cable industry is likely to continue its downward trend.
