What feedback has been received recently regarding aluminum usage in the NEV sector?

As the traditional "September-October peak season" approaches, positive news has emerged from the automotive extrusion and 3C extrusion sectors in August. This week, the operating rate of leading plate/sheet, strip and foil enterprises also saw an increase, with the operating rate of leading aluminum plate/sheet and strip enterprises rising by 0.6 percentage points to 71.0%. The operating rate of leading aluminum foil enterprises increased by 0.7 percentage points to 75.1%. The operating rate in the recycled and primary alloy sectors remained stable during the week, and is expected to rise in September as demand warms up. However, according to the SMM survey, the increase in operating rates across various sectors is limited, and there is no significant growth trend typical of the peak season. Overall, there is an expectation of improved demand in September, but high aluminum prices are suppressing downstream purchasing sentiment, hindering the destocking process of aluminum ingots. It is expected that the operating rate will show a slow upward trend in the short term.
Focusing on end-user demand, firstly, in the PV module sector, the cumulative production of PV modules from January to August increased by about 18% YoY. Downstream module plants expect mixed changes in production in September, with a slight overall increase. Some leading module plants are optimistic about October production, and the operating rate of PV frame production is expected to stabilize. Currently, the average processing fee for PV frames in the industry is 3,300-3,400 yuan/mt. Many processing plants report operating at a loss, and some suppliers indicate they may reduce orders in the future. For module plants, they prefer to cooperate with listed companies or leading large enterprises due to their more abundant funds. In terms of aluminum consumption, the aluminum consumption per GW for PV frames in leading module plants is currently about 4,800 mt/GW.
Secondly, in the NEV sector, June-July is the off-season for automobile production and sales, with OEMs conducting line maintenance and end-users primarily digesting inventory. According to the SMM survey, the order volume for automotive extrusion in south China and east China has shown signs of recovery, potentially supporting the operating rate. Although automotive extrusion also faces cut-throat competition in processing fees, due to its high entry standards and quality requirements, and with downstream demand being decent, many extrusion plants are still considering transitioning to this sector. Looking ahead to H2, favorable policies such as the replacement of old vehicles with new ones and the promotion of NEVs in rural areas will continue to be implemented, helping to further unleash the consumption potential of the automotive market. However, challenges remain, including insufficient domestic consumer confidence, severe international trade protectionism, and intensified industry competition. Combined with ongoing policy disruptions, these factors may limit the increase in the operating rate of related aluminum semis industries in H2.
Overall, 2024 has been a year where domestic aluminium consumption continued to tilt towards the NEV industry. The expected growth in global photovoltaic installations and the increasing penetration rate of NEVs year by year are expected to drive YoY growth in aluminium applications in transportation and power sectors. In H2 2024, by Q3, Yunnan's aluminium production had basically returned to full capacity, while other regions in China maintained high operating rates. However, considering the significant uncertainties in hydropower aluminium in Yunnan and other regions in Q4, the growth rate of domestic aluminium production in H2 2024 is expected to slow to around 2%. Meanwhile, due to the continued losses in aluminium imports, the net import volume of domestic aluminium in H2 is expected to decrease by 13.5% YoY, reducing the pressure on apparent consumption in H2 2024. On the consumption side, the growth in the domestic photovoltaic and NEV sectors in 2024 met expectations, but the increase in industry production in H2 was lower-than-expected. SMM expects domestic aluminium consumption in 2024 to converge to 4.4%.