According to SMM data, the comprehensive PMI index of the domestic aluminum processing industry in January 2024 recorded 42.90%, still below 50%. As CNY holiday drawing near, companies gradually slash or halt production. Some small and medium-sized companies, especially those located in north China, have stopped production in the middle of the month. Therefore, the production index fell significantly MoM, recording 29.3%. At the same time, due to the reduction in production and orders, the purchase of raw materials has also decreased, coupled with the weak end consumption in recent years, companies have mostly purchased and produced on demand. The inventory of raw materials has decreased, and the mood to stock up before the holiday is not high. The finished product inventory index recorded 25.7%, mainly due to the collection of receivables at the end of the year, and closures of logistics, so companies are speeding up their shipments.
Aluminum plate/sheet and strip: The PMI of the aluminum plate/sheet and strip industry in January was 53.0%, up 10.2 points MoM, mainly because many aluminum plate/sheet and strip companies in Henan were affected by environmental inspections at the end of December, and data such as output, sales, and finished product inventory dropped rapidly, but they recovered at the end of January. At the end of January, there are only about 10 days left before the CNY holidays. Most large-scale aluminum plate/sheet and strip companies have no holiday plans, and raw material inventories increased for holiday production. At the same time, logistics stopped at the end of the month, and finished product inventory is relatively high. As February coincides with the CNY holidays, most companies' output and order volumes will decline. The impact of the Spring Festival will end at the end of February, and inventories are expected to fall back to normal levels. Under multiple influences, the PMI of the aluminum plate/sheet and strip industry in February is expected to drop significantly, and is expected to be around 20.5%.
Aluminum foil: The PMI of the aluminum foil industry in January was 38.1%, down 9.6 points MoM, remaining below 50%. January is getting closer to the CNY holidays, and market demand gradually weakened. More downstream companies began to take CNY holidays within the month, causing many aluminum foil companies to report negative month-on-month order volume growth, dragging down the industry PMI. Although most aluminum foil factories have no intensive holiday plans during the Spring Festival, the production pace of some companies may slow down before and after CNY, and orders in February are expected to decline again compared with January. Therefore, the PMI of the aluminum foil industry in February is expected to be around 25.1%, still below 50%.
Building extrusion: The comprehensive PMI index for building extrusion fell sharply in January, recording 34.27%. In terms of sub-indices, the enterprise production index and new order index are still below 50%, recording 13.06% and 35.08% respectively. The sudden drop in the production index is mainly due to the approaching of the CNY. Most extrusion factories are on holiday from the end of January to the beginning of February. Therefore, the production gradually reduced in January, and the raw material procurement index also declined, recording 35.45%. In addition, the deadline for receiving orders was earlier before the year, and companies will speed up production and delivery of orders on hand. Therefore, the backlog order index and finished product inventory index fell this month, recoding 49.63% and 50%. At the same time, in order to ensure normal operation after the CNY, some large factories prepared raw materials before the CNY holiday based on the order. The raw material inventory index rebounded slightly this month, recording 52.77%. According to SMM research, extrusion factories have begun to enter the CNY holiday and are expected to gradually resume production after Feb 17th. As the traditional off-season, demand is poor in February. It is expected that the PMI of the construction profile industry in February 2024 will remain below 50%.
Industrial extrusion: In January, the PMI total index of the industrial aluminum extrusion industry recorded 48.66%, falling back below 50%. The production index recorded 57.22%, but the new orders index recorded 38.92%. This is mainly due to the approaching Chinese New Year, and the rush to deliver industrial materials before the year has certain support for production. However, new orders are insufficient, except for some PV extrusion manufacturers. The overall trend of orders is weakening. Boosted by the improvement in automobile and PV orders, the raw material purchase volume index of processing enterprises remained above 50%, recording 55.17%. In addition, some automobile extrusion factories shifted production during the CNY in order to meet customer demand. Therefore, companies prepare appropriately based on orders on hand, and the raw material inventory index recorded 60.94%. Overall, there were more urgent new PV orders in January, and their sustainability still needs to be verified. In addition, most extrusion factories shut down for the holidays in early February. It is expected that the PMI of the industrial extrusion industry in February will fall below 50%.
Aluminum cables: In January, the PMI comprehensive index of the domestic aluminum cable industry recorded 51.3%, down 1.9 percentage points MoM, and is still above 50%. Following the slowdown in terminal delivery in December, companies concentrated on producing UHV orders in January. The overall start-up situation of domestic aluminum cable companies increased in January, with the production index rising 8.18% MoM to 54.87%. Since the release of UHV orders in December, companies in January mainly focused on production orders on hand, with few new orders. The new orders index fell 18.97% to 45.22%, and the backlog order index fell nearly 5 percentage points to 31.67%. In January, approaching the CNY holiday, in order to meet production needs in February, companies are mainly stocking up, especially cable factories that are rushing to complete UHV orders. Other companies are stocking up in small quantities. The purchase volume index increased by 29.22% to 77.6%. Raw material inventories rose 30.32% to 77.6%. In February, some leading companies are rushing to produce UHV orders and will continue to maintain a high operating rate during the CNY holiday. However, most other companies are on CNY holiday, and the operating rate will fall sharply, coupled with few new orders during the holiday. The aluminum wire and cable industry PMI index is expected to fall back to 44.9% in February.
Primary alloy: The PMI of primary aluminum alloy in January was 40.3%, an increase of 3.8 points from the previous month. Due to weak demand in the automotive industry for primary aluminum alloys, wheel and parts companies began to take holidays in late January. Although most alloy plants are close to aluminum plants and cannot easily suspend production, the order volume has dropped significantly, suppressing the industry PMI. In February, it is expected that more wheel companies will suspend production and take holidays, the order volume of primary aluminum alloy companies may decline again, and the inventory of finished products at the end of the month will also decline as logistics resumes. Industry PMI is expected to fall to around 30.8%
Secondary alluminium alloy: The PMI of the secondary aluminium industry continued to fall in January, down 3.5 percentage points from the previous month to 42.5, still below 50%. Since mid-January, some secondary aluminum alloy companies have successively shut down their furnaces for the CNY holiday, but most companies' holidays are concentrated at the end of January and early February, and the resumption of work is mostly around February 18 or 25. Because aluminum scarp traders generally have holidays earlier than secondary alluminium alloy plants and resume work later, secondary aluminum alloy plants actively purchased aluminum alloy during the month, pushing up raw material inventory. However, the mood of downstream die-casting plants in stockpiling is moderate. Due to weak demand and sharp fluctuations in ADC12 prices before CNY, many die-casting plants went on holiday in advance. At the same time, due to the long holiday and pessimistic expectations for the market outlook, the overall stockpile of die-casting plants is not high. Affected by high raw material costs, the CNY holiday and insufficient demand, both secondary aluminum alloy output and new orders declined in January. The vast majority of companies will shut down their furnaces for holidays in February, and the PMI of the secondary aluminum alloy industry is expected to continue to decline.
As the CNY holiday approaches, end demand enters the traditional off-season. Aluminum processing companies cut production for upcoming CNY holiday, weakening the company's operating rate and order volume. Although some companies received urgent orders for delivery before CNY or need to rush to work due to early environmental protection production cuts. In terms of delivery, operating rates remained stable or even increased in January, but the impact of production cuts and holidays by most companies cannot be concealed. Overall, the first quarter is the off-season for aluminum processing companies, coupled with the impact of the CNY holiday in February, the PMI of the domestic aluminum processing industry is expected to continue to remain below 50%.
