The operating rate of aluminum processors slightly declined to 58.7% amid the off-season with high temperatures and weak demand [SMM Weekly Downstream Survey]

On July 3, 2025:

Under the influence of factors such as the high-temperature off-season, high aluminum prices, insufficient profit margins, and weak downstream demand, the operating rate of the aluminum processing industry this week decreased by 0.1 percentage points WoW to 58.7%. By sector: In the primary aluminum alloy sector, despite the continuous marginal support from the liquid aluminum alloying tasks and the aluminum billet conversion strategy, enterprises' willingness to expand remained low amid the off-season, with limited production increase momentum, and the operating rate may continue to weaken; In the aluminum plate/sheet and strip sector, producers actively cut production amid the dilemma of insufficient orders and high inventories, putting overall industry operating rates under pressure; In the aluminum wire and cable sector, there is still a pessimistic attitude towards July orders, but the delivery expectations for orders from State Grid in H2 remain positive, which may provide some boost to subsequent operating rates; Affected by the consumption off-season, aluminum extrusion enterprises generally face weak new orders, coupled with severe cut-throat competition in processing fees, putting pressure on enterprise operating rates; In the aluminum foil sector, under the influence of the traditional consumption off-season, there is no hope for a short-term recovery in end-use demand, and the operating rate may continue to decline; In the secondary aluminum alloy sector, pressure on both the demand side and the cost side has intensified, with some secondary aluminum enterprises taking measures such as short-term furnace shutdowns for maintenance or reducing production. SMM expects that the weekly operating rate of downstream aluminum processing may decrease by 0.4 percentage points WoW to 58.3% next week.

Primary Aluminum Alloy: This week, the operating rate of the primary aluminum alloy industry decreased slightly by 0.2 percentage points WoW to 53.8%, continuing a weak and stable trend. Despite the continuous marginal support from the liquid aluminum alloying tasks and the aluminum billet conversion strategy, enterprises' willingness to expand remained low due to multiple pressures such as weak end-use demand, insufficient new orders, thin profit margins, and the approaching high-temperature holiday. Production increase momentum was limited. Coupled with the uncertainty brought by the approaching deadline of July 9 for US-China tariffs, a substantive recovery in the industry still awaits clarification of trade policies and effective relief of cost pressures. SMM expects that the industry will continue the "liquid aluminum allocation-dominated, demand-dragged" game pattern in the short term, with the operating rate possibly showing a continuous weakening trend.

Aluminum Plate/Sheet and Strip: This week, the operating rate of leading enterprises in the aluminum plate/sheet and strip sector was recorded at 63.8%. This week, aluminum prices remained high, with downstream customers still showing strong wait-and-see sentiment, and finished product inventories not being effectively reduced. End-use demand continued to be weak, especially in major consumption sectors such as automobiles and electronics, which began to show signs of fatigue, with new order volumes shrinking. In terms of processing fees, due to inventory backlogs in the Gongyi area, the processing fees for cast-rolled coils have generally fallen below the cost line, directly halving compared to the peak season, leaving no more room for volume discounts. Producers actively cut production amid the dilemma of insufficient orders and high inventories. Although leading enterprises are striving to adjust their structures to maintain stability, the overall operating rate of the industry is under significant pressure. With high finished product inventories, the deepening of the traditional off-season, and high aluminum prices, the operating rate of aluminum plate/sheet and strip is expected to continue declining in the short term.

Aluminum Wire and Cable: This week, the operating rate of leading enterprises in the aluminum wire and cable sector stood at 61.8%, unchanged from last week. According to enterprise feedback, there is a fear of high prices, and enterprises are still focused on reducing raw material and finished product inventories. The industry's operating sentiment has not shown signs of recovery. Meanwhile, enterprises hold a pessimistic attitude towards order expectations in July, and the pace of terminal cargo pick-up continues to slow down. Looking ahead, although current enterprise operations are weak, supported by backlog orders, the operating rate can still be maintained, with relatively limited downward space. Despite the weak expectations for July, the delivery expectations for orders from State Grid in H2 remain positive, which may provide a certain boost to subsequent operations. It is expected that the operating rate of aluminum wire and cable will remain weak in the short term.

Aluminum Extrusion: This week, the national operating rate of extrusion declined slightly by 0.5 percentage points MoM to 49.5%. In the construction materials sector, the overall operating rate of sample enterprises slipped slightly from last week. According to the SMM survey, leading enterprises in central China, south China, and east China all reported sluggish growth in new orders this week. Coupled with the continuous decline in processing fees for spray coating and thermal insulation bridge-cut extrusion, enterprise profits are under pressure, and the operating rate of construction materials has once again declined to around 40% this week. This week, the operating rate of industrial extrusion declined slightly from last week. Some leading PV frame extrusion enterprises in east China, southwest China, and Hebei reported that orders were relatively saturated in the first week of July, and orders on hand provided certain support to the operating rate. A few manufacturers' operating rates increased slightly from last week. However, there is significant uncertainty in subsequent orders, and the risk of production cuts still exists. It is expected that operations will weaken in mid-July. In terms of automotive extrusion, as July began, some large and medium-sized sample enterprises in east China and central China reported a strong off-season atmosphere in the industry. New orders remained sluggish this week, but a few enterprises in east China reported that their foreign orders were relatively saturated, and their operating rates remained stable at around 60%. Meanwhile, some enterprises in east China that previously switched from construction materials to industrial materials reported severe cut-throat competition in the industrial materials sector. After comprehensive evaluation, these enterprises decided to shut down their industrial material production lines and optimize their personnel. Overall, affected by the off-season in consumption, aluminum extrusion enterprises generally face sluggish new orders and operating pressure. SMM will continue to monitor the actual progress of order implementation in various fields.

Aluminum Foil: This week, the operating rate of leading enterprises in the aluminum foil sector stood at 69.6%. The overall demand in the aluminum foil market remains weak, and the industry's operating rate continues to decline under pressure. By product, packaging foil demand is sluggish and deeply involved in price competition. Air-conditioner foil has a large scale but relies on volume discounts to barely maintain operations. Although some enterprises in the battery foil sector have increased production, downstream enterprises have also announced production cut plans, leading to weakened orders, which is difficult to offset the overall downturn. It is currently the traditional consumption off-season from July to August, with no hope for a recovery in end-use demand. It is expected that the operating rate of the aluminum foil industry will continue to decline in the short term.

Secondary aluminum alloy: This week, the operating rate of leading enterprises in the secondary aluminum industry remained stable at 53.6%. Entering July, the demand side for secondary aluminum has been under significant pressure. Factors such as the high-temperature off-season and high aluminum prices have continued to impact downstream orders, with some die-casting enterprises reducing production. Pressure on the cost side has also intensified simultaneously, with prices of core raw materials such as aluminum scrap, silicon, and copper rising collectively, continuously pushing up the cost of ADC12 raw materials. However, product selling prices have struggled to keep pace, leading to a further expansion of theoretical losses in the industry and a significant increase in production and operational pressures for enterprises. Squeezed by both the shortage of aluminum scrap supply and weak market demand, some secondary aluminum enterprises have taken measures such as short-term furnace shutdowns for maintenance or reducing production. However, sample leading enterprises can still maintain their current production scale, but their subsequent operating rates face downward pressure.

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(SMM Aluminum Team)