PMI data of domestic aluminum downstream processing stood above the 50 point mark for two consecutive months

SHANGHAI, Aug 8 (SMM) –

According to SMM data, in July 2023, the comprehensive PMI index of the domestic aluminum processing industry rose by 1.8 percentage points month-on-month to 53.1%, which was above 50% for two consecutive months. In July, domestic aluminum downstream processing enterprises were still in the traditional off-season, except for the new energy, photovoltaic, and automobile sectors where demand picked up, thereby leading to a slight increase in the order volume and operating rate of related processing companies, driving the industry's PMI to rise. From the point of view of subdivided indicators: In July 2023, raw material procurement, demand and raw material inventory of the domestic aluminum downstream sectors all perked up, among which the backlog of orders and raw material inventory increased significantly, mainly due to the recovery of demand in some sectors. In addition, scorching weather put some industrial aluminum extrusion companies on holidays. Therefore, there was a backlog of orders.

In terms of sectors, the PMI data of aluminum plate/sheet and strips, industrial aluminum extrusion and aluminum wire and cable rose above the 50 point mark in July, mainly due to slight improvement to newly added orders and start-ups of enterprises. The PMI data of aluminum foil remained above 50% on battery foil order increase. Shrinking terminal demand from real estate industry dragged down the PMI data of construction aluminum extrusion by 0.9 percentage points month-on-month. Impact of positive policies introduced recently was not universally felt on construction aluminum extrusion sector, owing to the long construction period of the real estate industry itself, muted demand for house procurement of residents and difficulty in withdrawing funds. A slack season demand from related enterprises unfolded.

Aluminium plate/sheet and strip: The PMI data of aluminium plate/sheet and strip sector added 10.3 percentage points MoM to 60% in July. With little changes on demand and supply, the aluminum plate/sheet and strip market remained unaltered in July, except for some sample companies whose another price cut made for a mild increase in order volume and operating rate, thereby pushing up the industry PMI. There will be no possibility of a sharp rebound in demand in August, and PMI data of aluminium plate/sheet and strip sector is unlikely to stand above 50%.

Aluminium foil:

The PMI of aluminum foil sector was down 11.4 MoM at 57.3% in July. In July, a number of aluminum foil companies reported that their battery foil output and orders increased significantly, while the production and sales of packaging foil and other aluminum foil products did not decline sharply. Eventually, the PMI of the sector once again stood higher than the 50 point mark. In August, it is necessary to pay close attention to whether the production and sales of aluminum foil products such as packaging foil and air-conditioning foil would drop, and the PMI may fall below 50%.

Construction aluminum extrusion: In July, the comprehensive PMI index of construction aluminum extrusion was 45.2%, still below the 50%. In terms of indices, largely affected by a slack seasonal demand, low operating rate and poor order intakes, enterprise production index at 49.6% and new order index at 47.7% appeared. The finished product inventory index dropped to 42.9%, mainly due to the fact that enterprises wanted to withdraw funds as soon as possible via acceleration of delivery and promotion of downstream sectors to pick up goods. Suppressed by the overseas recession, the new export order index dropped significantly to 31.3% in July, and purchasing volume index and raw material inventory index followed to dipped to 47.6% and 43.0% respectively. In addition, the supplier delivery time index in July remained at 50.0%. It is expected that the PMI index of construction aluminum extrusion will still stood below 50% under the sway of a slack seasonal demand.

Industrial aluminum extrusion: In July, the total PMI index of industrial aluminum extrusion industry recorded 54.0%. In terms of indices, the production and new order indexes recorded 57.2% and 58.1% respectively, feeling impact from pick-up in downstream demand. Among them, traditional seasonal high in September and October is around the corner, and order volume of the industrial aluminum extrusion companies, automotive ones and photovoltaics ones in Anhui hiked, and companies were upbeat about recovery of orders. With the increase in orders for industrial aluminum extrusion, the raw material purchase volume and inventory indices of processing enterprises recorded 52.6% and 55.2% respectively. The raw material inventory of most enterprises is mainly purchased on demand, while a small amount of the inventory aimed to meet subsequent demand. In addition, affected by the overseas recession, the index of new export orders for industrial aluminum extrusion dropped to 38.8%. On the whole, it is expected that the PMI of the industrial aluminum extrusion industry in August will appeared stable-to-strong.

Aluminum wire and cable: The PMI of the domestic aluminum wire and cable industry recorded 50.7% in July, up 1.7 percentage points MoM. In July, wire and cable companies in East China mainly maintained stable production, while some in the north increased output on order hikes and more downstream buyers to pick up goods. In July, the domestic aluminum wire and cable production index increased by 7.8 percentage points month-on-month to 48.2%. In July, in aluminum wire and cables, indices at new domestic orders, new export orders, and purchase volume were all above 50%, mainly due to the release of sporadic bidding projects by the State Grid within the month. New orders in the industry increased slightly, but there were not many winning bidders. In the short term, Given that September will see a expectation on centralized delivery related to the bidding projects, some producers may increase production for the delivery in August. Therefore, the aluminum wire and cable industry will see higher operating rate and order increase. It is expected that PMI data of the aluminum wire and cable will maintain above 50% in August.

Primary aluminum alloy: PMI of primary aluminum alloy sector was 51.5% in July, down 6.7 percentage points MoM. The primary aluminum alloy market stood stable in July, and demand remained low during the traditional off-season. Driven by the national alloying policy, most primary aluminum alloy factories had great incentive to produce, while individual ones further increased production after equipment debugging in July from restart seen in June, thereby pushing up production and order volume. The PMI of the sector trended higher than the 50 point mark. July-August is the traditional off-season for primary aluminum alloys, and the sample plants already resumed operation. Therefore, it is expected that the PMI of the primary aluminum alloy industry in August will keep hovering around the 50 point mark.

Secondary aluminum alloy: The PMI data of secondary aluminium alloy sector rallied by 3.9 percentage points to 49.6%, but sill below the 50 point mark In July, a slack seasonal terminal demand lingered, except for rising demand from orders in the automotive and other fields which slightly increased the output of some leading secondary aluminium alloy plants. While small and medium-sized plants aimed to cut production on limited order intakes and insufficient raw material supply. In July, tighter supply of aluminum scrap stimulated the plants to scramble to raw materials, and the inventory of raw materials continued to decline. Inventory of finished products accumulated slightly due to insufficient demand. Entering August, as downstream sectors took days off for high-temperature weather, orders for secondary aluminium alloy are expected to decline. The PMI in August is expected to remain below 50%.

Brief comment:

High temperature and typhoon weather, power rationing in some areas will make a dent in the operating rate of downstream plants and transportation. However, with upcoming the traditional seasonal high in September and October, downstream demand from new energy, photovoltaic and automobile sectors will gradually pick up, which may lead to a further increase in the order volume and operating rate of related products. In addition, positive policies linked to the real estate industry to be issued will shore up market sentiment at a modest level, but it will take some time for the policies to be implemented. In a word, according to the picture of terminal demand and orders of downstream plants, SMM predicts that the PMI of the domestic aluminum downstream processing industry will probably remain weak in August.