SHANGHAI, Feb 21 (SMM) – Expectations of greater orders at downstream manufacturers of aluminium wire and cable drove them to stockpile aluminium rod as raw materials in the first week after the CNY holiday, and this lifted significantly the processing charges of aluminium rod during the same period.
SMM also learned that post-holiday inventories at aluminium rod processors stood below than a year ago, as some cable and wire plants ordered cargoes ahead of CNY. This also prompted aluminium rod processors to firm up offers.
In the first post-CNY week ended February 15, average processing charges of aluminium rod in Shandong rebounded some 70 yuan/mt from pre-holiday, to 320 yuan/mt as of February 15, with the lowest prices rising 90 yuan/mt.
Aluminium rod processors were eager to destock ahead of CNY breaks, in order to control in-plant inventories amid normal production during CNY. This pushed them to lower offers of processing fees, and led to a lower base before the holiday.
As of February 1, average processing charges in Shandong dipped to a low of 260 yuan/mt and that in Henan to a low of 255 yuan/mt. SMM assessments showed that the fees typically declined by some 100 yuan/mt during the week before Lunar New Year.
While aluminium wire and cable manufacturers restocked, downstream demand has yet to resume fully as workers only returned after February 19. This will depress operating rate across those manufacturers in February.
Operating rates across Chinese manufacturers of aluminium wire and cable averaged 32.8% in January, unchanged from December but fell 14 percentage points from a year ago, SMM research found. For March, expectations of downstream orders are likely to buoy the rate to 50%.
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