Double pressure from high aluminum prices and off-season leads to continuous decline in weekly operating rate of aluminum processors [SMM weekly downstream survey]

June 26, 2025:

This week, the downstream aluminum processing sector remained deeply entrenched in off-season sentiment, with the weekly operating rate down 1 percentage point WoW to 58.8%. Segment breakdown: persistently high aluminum prices continued to suppress consumption, with weak end-use demand and seasonal factors exerting widespread pressure across all segments. Primary alloy saw production cuts due to insufficient new orders and inventory pressure; aluminum plate/sheet and strip faced high finished product inventories and escalating price war risks; aluminum wire and cable was dragged down by slow State Grid matching and elevated costs; aluminum extrusion struggled with sluggish construction orders and declining PV/automotive orders; aluminum foil demand weakened amid intensifying price wars; secondary aluminum grappled with insufficient off-season orders and high costs. Core constraints included negative feedback from high aluminum prices, weak off-season demand, inventory pressure, and cost losses..SMM expects the downstream aluminum processing operating rate may drop 0.8 percentage points WoW to 58.0% next week.

Primary aluminum alloy: The sector's operating rate edged down 0.2 percentage points WoW to 54.0%. This mainly reflected sustained high aluminum prices in mid-to-late June suppressing terminal demand, coupled with sluggish downstream consumption and inadequate new orders slowing seasonal cargo pick-up rhythms. Although May's aluminum alloy wheel hub export data showed resilience, and production at top-tier enterprises in the sample remained temporarily stable, some firms marginally reduced operating rates due to capital and inventory pressures. Notably, most sampled enterprises reported planned production cuts of varying degrees in anticipation of weak domestic demand in July. SMM anticipates significant downward pressure on the sector's operating rate in early July. Outlook: the sector is expected to remain under pressure. Domestically, traditional off-season patterns and unresolved Sino-US tariffs create dual headwinds, while high aluminum prices' negative consumption feedback persists. Substantial recovery awaits clearer trade policies and effective cost-side relief.

Aluminum plate/sheet and strip: Leading enterprises' operating rate fell 1.2 percentage points WoW to 63.8%. With aluminum prices still elevated, downstream customer pick-ups remained sluggish, keeping finished product inventories high. Approaching July, key demand drivers like domestic automotive and electronics sectors announced production cut plans, likely depressing aluminum plate/sheet and strip demand further. Oversupply conditions forced more enterprises to cut output, including minor reductions by some leading firms. A new price war looms, though some companies operating near cost lines since spring through volume discounts may struggle to absorb further price cuts. In summary, against the backdrop of destocking unsalable finished goods inventories and continuously weakening demand, it is expected that the operating rate of aluminum plate/sheet and strip enterprises will fluctuate downward.

Aluminum wire and cable: This week, the operating rate of leading aluminum wire and cable enterprises stood at 61.8%, down 1.4% WoW, with the industry's operating rate continuing to decline. According to feedback from top-tier enterprises, orders have performed well since the first half of the year, with winning bids frequently materializing, providing sufficient support from orders on hand. However, the State Grid's order matching speed remains relatively slow, coupled with the aluminum price continuing to fluctuate at highs. Current production only meets short-term rigid demand deliveries, with the procurement pace significantly slowing down in an attempt to achieve the goal of reducing both raw material and finished product inventories. Wire and cable enterprises in southern China have reported a slight increase in operating rates recently, mainly influenced by the delivery and order matching mechanisms of China Southern Power Grid. In addition, bidding for orders this month was concentrated in the first half of June, and new orders have declined since the middle and late June. However, given the concentrated materialization of orders in the early stage, enterprises also need time to digest the backlog orders on hand. Therefore, it is necessary to focus on the delivery cycle status of orders such as power transmission and transformation after August. It is expected that the operating rate of aluminum wire and cable will remain in the doldrums in the short term.

Aluminum extrusion: This week, the national extrusion operating rate fell slightly by 2.5 percentage points MoM to 50.0%. In the construction materials sector, the overall operating rate of sampled enterprises declined compared to last week. According to the SMM survey, top-tier enterprises in central China, southern China, and eastern China all reported sluggish growth in new orders this week, only maintaining production for orders on hand, leading to a decline in the operating rate. Some small and medium-sized construction extrusion enterprises in Shandong reported that despite the decline in aluminum prices this week, their customers' wait-and-see sentiment remained strong. They reported that downstream customers believe that the earlier they place orders when expecting a price decline, the more likely they are to place orders at a high point. Customers generally prefer to place orders when they expect prices to bottom out. This week, the industrial extrusion operating rate dropped back slightly compared to last week. PV frame sample enterprises reported that they are negotiating next month's cooperation with module factories. Some leading PV frame extrusion enterprises in eastern China, southwestern China, and Hebei reported that orders are expected to decline next month. Production orders this week cannot be linked with next month's orders. Additionally, some processing enterprises expect that the PV frame processing fee may further decline, compressing corporate profitability and leading to a pullback in the operating rate. In terms of automotive extrusion, some large and medium-sized sample enterprises in eastern China and central China reported that due to the obstruction of destocking at some OEMs and the slowdown in production speed, new orders are sluggish. Coupled with insufficient orders on hand, their operating rates have dropped to around 50%. Despite these enterprises actively negotiating new cooperation, it has not yet been implemented. The operating rates of other industrial material production enterprises, such as those in rail transit and power pipelines, remained basically unchanged from last week this week. The main reason is that their orders are mainly long-term contracts from long-established customers, with a relatively stable customer base. Overall, affected by the off-season in consumption, the overall operating rate of aluminum extrusion has declined significantly. SMM will continue to monitor the actual progress of order fulfillment in various fields.

Aluminum foil: This week, the operating rate of leading aluminum foil enterprises dropped slightly by 1.1 percentage points WoW to 69.6%. The market demand for aluminum foil continued to decline during the week. By product, packaging foil has seen a straight-line decline in demand since April while being deeply entangled in a price war. Although the production scale of air-conditioner foil is large, its operating rate relies on the support of "volume discount". Downstream battery foil enterprises have also reported production cut plans, with orders declining as well. Overall, the market demand for aluminum foil has weakened recently, which is expected to drive the operating rate down gradually.

Secondary aluminum alloy: This week, the operating rate of leading secondary aluminum enterprises remained stable at 53.6%. Although leading enterprises can maintain normal production, the overall operating rate of the industry has still dropped back slightly due to the off-season in demand, supply pressure, and high raw material costs. As July approaches, the off-season effect persists, and competition in the market intensifies under the impact of low-priced supplies. Additionally, terminal automakers may reduce production due to high-temperature holidays or inventory pressure, which is expected to further suppress the operating levels of secondary aluminum plants. In the short term, the industry's operating rate may continue to decline slightly, with a focus on changes in raw material supply and demand.