Year-End Summary of Aluminum Rod: Downstream Cable Market Ushers in Investment Opportunities, Creating New Demand Trends for the Aluminum Rod Market [SMM Analysis]

Опубликовано: Jan 19, 2025 18:46

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January 19, 2025— Since the pandemic in 2022, downstream demand for aluminum wire and cable gradually recovered. Supported by policies and cost-side advantages, the development of aluminum wire and cable, driven by power grid construction, PV grid connection, and the use of aluminum as a substitute for copper, has entered a prosperous phase, thereby boosting the domestic primary aluminum rod industry with continuous increases in operating capacity. According to SMM, the annual capacity of domestic primary aluminum rod manufacturers was 7.62 million mt, with an additional capacity of 364,000 mt this year. The domestic primary aluminum rod capacity continued to show an increasing trend. With the advancement of power grid construction and the widespread application of new energy, market demand significantly increased, leading to a corresponding growth in aluminum rod supply. Based on SMM's estimates of domestic primary aluminum rod production, the production in 2024 was 4.36 million mt, up 4% YoY from 4.19 million mt in 2023, further boosting market supply...

January 19, 2025
Since the pandemic in 2022, downstream demand for aluminum wire and cable has gradually recovered. Power grid construction, PV grid connection, and the substitution of aluminum for copper, supported by policies and cost advantages, have ushered in a prosperous period for aluminum wire and cable development, thereby driving the growth of domestic primary aluminum rod production, with operating capacity continuously increasing.

SMM estimates that the annual capacity of domestic primary aluminum rod manufacturers is 7.62 million mt, with an additional capacity of 360,000 mt added this year. The capacity of domestic primary aluminum rods continues to grow.

With the advancement of power grid construction and the widespread application of new energy, market demand has significantly increased, and aluminum rod supply has grown accordingly. According to SMM's production forecast for domestic primary aluminum rod manufacturers, the production of domestic aluminum rods in 2024 is expected to reach 4.36 million mt, up 4% YoY from 4.19 million mt in 2023, further increasing market supply.

Meanwhile, considering that leading downstream enterprises have their own aluminum rod production lines, SMM predicts that domestic aluminum rod supply in 2024 will reach 5.15 million mt, up 4.5% YoY from 4.93 million mt in 2023. With the continuous increase in total investment by the two major power grids, power grid construction remains a policy focus, and PV grid connection projects are growing year by year. Demand for aluminum wire and cable remains optimistic, and the operating capacity of aluminum rods is expected to continue increasing.

Although there is a certain demand gap in the aluminum rod market in 2024, domestic operating capacity remains high, and market supply is abundant. Processing fees for some aluminum rod models have underperformed compared to previous years. As a result, production strategies on the supply side have shifted, with manufacturers adjusting their operations toward higher-value aluminum rods. Consequently, the growth rate of aluminum rod supply may slow down. It is expected that the total domestic aluminum rod supply in 2025 will reach 5.3 million mt, up 3% YoY.

In terms of segmented markets, the "dark horse" in the aluminum rod market this year is undoubtedly high-conductivity aluminum rods. This is due to the high conductivity requirements of UHV cables and the tight market supply, which led to instances of undersupply for these rods in 2024.

For aluminum alloy rods, they are mainly used in PV and wind power grid connection projects. With new installed capacity achieving YoY growth, demand for alloy aluminum rods has maintained a positive growth trend this year.

For 1-series aluminum rods, which are used in various applications, the pickup volume of orders from State Grid increased by 20% MoM. Coupled with the rising market share of aluminum wire and cable, market demand has increased. However, due to the sustained high operating rates on the supply side, the market experienced a period of oversupply during the year.

According to SMM's forecast, total aluminum rod demand in 2024 is expected to reach 5.25 million mt, up 7.7% YoY from 2023.

Breaking it down further, domestic power grid construction may require 1.857 million mt of aluminum rods, up 20% YoY from 1.547 million mt in 2023, with the growth rate fluctuating at highs.

In the PV grid connection segment, annual demand for aluminum alloy rods may reach 418,300 mt, with a YoY increase of over 30%.

Additionally, considering cost advantages on the raw material side, the substitution of aluminum for copper has accelerated this year. In segments such as aluminum enamelled wire and residential wire and cable, demand for aluminum rods increased by 5% and 4.5%, respectively.

For 2025, there are 12 UHV projects pending completion. It is expected that power grid construction will continue to drive aluminum rod demand, while the slight increase in new installed capacity for new energy will also contribute to demand growth. However, considering the sustained high operating rates downstream and the uncertain outlook for the real estate construction sector, aluminum rod demand in 2025 is projected to reach 5.36 million mt, up 2.2% YoY.

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