SMM data showed that the PMI for China’s aluminium processing sectors stood at 29.1% in February 2024, remaining in the contraction territory. In February, aluminium processing companies were basically shut down during the CNY holiday, only some large companies maintained production, but output was lower than usual. Thus, the production index fell significantly MoM to 20.9%. In addition, downstream demand has not fully recovered yet amid traditional off-season, dragging down new order index to 22.7%. The aluminium processing industry generally believes that terminal demand will not recover until March. The reduction in production and order volume affected the purchase volume of raw material, coupled with weak terminal consumption, causing companies mostly purchased on demand. The raw material inventory index stood at 35.3%, and the finished product inventory index was 28.4%.
Construction aluminium extrusion: The production index and new order index are still below 50%. The production index fell sharply again due to output cut in CNY and decline in raw material procurement as long CNY holiday affected downstream demand. The index for employment fell as some workers left their jobs or have not yet arrived at the end of February. Aluminium extruders began to resume production after CNY. The recovery of the demand and the supply are expected to return to normal in March, boosting PMI index of the aluminium construction extrusion industry in March 2024.
Industrial aluminium extrusion: The production index recorded 5.05%, but new orders index recorded 63.02%. This was mainly due to the production reduction during the CNY holiday. However, the downstream demand for industrial aluminium extrusion recovered faster than that for building materials, driving the new orders index to rebound. Boosted by improvement in automobile and PV orders, the index for purchasing volume of raw material for processing companies remained in the expansion territory. Some companies arranged shift work as workers returning home for CNY holidays did not return to work immediately after the holiday. Workers are expected to resume work at the end of February and early March. Therefore, the index for employment slipped into contraction territory. Overall, the photovoltaic and automotive sectors resumed production quickly, downstream orders are relatively stable, and some companies starting operations at the end of the month were close to full production. It is expected that the PMI of the industrial aluminium extrusion industry will rebound to above 50% in March.
Aluminium plate/sheet and strip: In February, some companies stopped production or slowed down their production for CNY. At the same time, many downstream companies also have holiday plans for CNY, hurting order volume. In addition, due to halted logistics before CNY, the raw material inventory of companies did not stop production during CNY was at a high level in late January. At the end of February, the inventory dropped to normal levels, dragging down the total PMI. In traditional peak season in March, most companies' orders and output are likely to achieve positive growth compared with February, boosting PMI to around 72.3%.
Secondary aluminium alloy: In February, secondary aluminium alloy plants successively shut down for CNY at the beginning of the month, with most closing for 5-15 days, and a few will halt production for 20 days or more. In addition, as the pace of downstream production resumption after CNY holiday was slow, monthly output and new orders declined significantly. In terms of inventory, due to the early holiday and late resumption by aluminium scrap traders, secondary aluminium alloy plants basically completed raw material stockpiling in January, coupled with high aluminium scrap prices, secondary aluminium alloy plants mainly digested inventory in February, dragging down raw material inventories. In March, with the resumption fully resumed, the production will return to pre-holiday level, driving up the industry PMI.
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