According to SMM data, the comprehensive PMI index for the domestic aluminum processing industry in August 2024 was 43.6%, up 1.8 points MoM, but still below the 50 mark. By segment, the PMIs for domestic construction aluminum extrusion and plate/sheet, strip and foil were below the 50 mark, while the aluminum wire segment PMI was 50.5, remaining above the 50 mark. The industrial aluminum extrusion segment was the first to emerge from the off-season, with a PMI of 51.97%, rising above the 50 mark. In terms of detailed indicators, the atmosphere of the off-season for domestic consumption persisted in August. Although the industrial extrusion segment showed some recovery, it could not offset the continued decline in construction aluminum consumption, and the plate/sheet, strip and foil industry remained weak, with the production index at 36.2%. In terms of new orders, orders for aluminum foil products continued to decline, and construction material companies were cautious in taking orders due to payment security issues. Only new orders for industrial extrusion and aluminum wire were in the expansion territory, failing to drive the new orders index up, which ultimately recorded 40.1%.
By segment:
Aluminum plate/sheet and strip: The PMI for the aluminum plate/sheet and strip industry in August was 38.5%, down 0.6 points MoM. August remained a traditional off-season, with market demand becoming increasingly sluggish for most of the month. Only at the end of the month did a few companies report a slight recovery in orders, but this was insufficient to drive MoM growth in production and sales data. In late August, aluminum prices continued to rise, and market bullish sentiment was strong. However, due to weak end-user demand support, the rise in aluminum prices had little impact on downstream companies' willingness to take delivery, and finished product inventories did not see a significant decline. With the traditional peak season arriving in September, most aluminum plate/sheet and strip companies expect production and sales to improve, and the PMI is expected to rise above the threshold.
Aluminum foil: The PMI for the aluminum foil industry in August was 33.9%, up 3.1 points MoM. Demand for various aluminum foil products remained weak in August, with no signs of improvement, and some companies' operating rates declined again. Orders for food packaging foil continued to decrease, while products like air-conditioner foil and battery foil remained stable, with little fluctuation compared to July. With the arrival of the consumption peak season in September, demand for most aluminum foil products is expected to see a seasonal recovery, likely driving the industry PMI back above the 50 mark.
Construction aluminum extrusion: The comprehensive PMI index for construction aluminum extrusion in August was 45.95%, still below the 50 mark. August remained an off-season, compounded by the long-term negative growth in new construction and completion areas in the traditional real estate sector. Construction aluminum extrusion companies reported an even stronger off-season atmosphere, with the production index still low at 34.56%. According to an SMM survey, most companies' order volumes were flat compared to the previous month. After aluminum prices adjusted at the end of August, downstream companies' wait-and-see sentiment was significant. Considering payment security and stability, construction extrusion companies were cautious in taking orders, with the new orders index below the 50 mark at 49.65%. Additionally, some small companies experienced production cuts and staff losses, with the employment index falling to 49.64%. Overall, demand for construction extrusion is unlikely to improve, and companies have a pessimistic outlook for the future, expecting the comprehensive PMI for construction aluminum extrusion to remain below the threshold in September.
Industrial aluminum extrusion: The comprehensive PMI index for the industrial aluminum extrusion industry in August was 51.97%, rising above the 50 mark. By sub-index, orders for automotive extrusion and 3C extrusion showed signs of improvement in August, with the production index at 58.91%. In September, the production schedule for PV modules is expected to rise slightly, providing some support for suppliers' operating rates, with the new orders index at 51.44%. Additionally, some industrial extrusion plants saw a decline in production, mainly because they were unwilling to engage in cut-throat competition and did not want to grab orders at low prices. Amid the off-season inventory reduction, the finished product inventories index remained below the threshold at 44.92%. Overall, the industrial extrusion segment showed a warming trend first, and the comprehensive PMI for industrial extrusion is expected to remain above the threshold in September.
Aluminum wire and cable: The comprehensive PMI index for the domestic aluminum wire and cable industry in August was 50.5%, remaining above the 50 mark. In August, aluminum prices first dipped and then rebounded, with the matching speed of end-user orders slowing down. Small enterprises' operating rates declined, with the production index at 48.64%, down 5.6% MoM. Additionally, new orders for distribution network agreements in various provinces came to a temporary halt, while new orders for Southern Grid and transmission and transformation projects provided continuous support for the aluminum wire industry, with the new orders index at 52.47%, in the expansion territory. In terms of finished product inventories, they rose 6.5% MoM to 54.2%, with the delivery speed in the aluminum wire industry slowing down this month. The purchasing volume index was 55.85, remaining in the expansion territory. In the first half of August, aluminum prices continued to fall, and end-user purchase willingness was strong. However, as aluminum prices rebounded later, the market turned to a wait-and-see mode, and transactions became flat. Currently, large enterprises are operating steadily due to sufficient orders on hand, while small and medium-sized enterprises may see weaker operating rates due to rising raw material prices. Additionally, hot weather in September may hinder power grid construction progress, affecting end-user deliveries. The PMI for aluminum wire is expected to fall below 50 in September.
Primary aluminum alloy: The PMI for the primary aluminum alloy market in August was 50.7%, up 6.6 points MoM. The overall performance of the primary aluminum alloy market in August was uneventful, with most alloy enterprises maintaining their original production pace. Some enterprises increased production to consume liquid aluminum. On the demand side, August was the off-season, and downstream customers' willingness to take delivery remained insufficient, with order volumes declining again. In September, as the high-temperature holidays for downstream enterprises end, the primary aluminum alloy market will enter the peak season, with order volumes expected to increase compared to August, and the industry PMI is likely to rise above the threshold.
Secondary aluminum: The PMI for the secondary aluminum industry in August remained below the 50 mark, rising 8 points MoM to 47.5. In terms of production, operating rates varied among enterprises in August, with about 52% of enterprises maintaining stable production, showing little overall change. About 30% of enterprises saw a decline in production, influenced by the implementation of the Fair Competition Review Regulations in early August, with enterprises enjoying policy benefits worrying about increased tax burdens and proactively reducing operating rates to mitigate risks. Additionally, the traditional off-season or high-temperature holidays for end-users constrained orders, dragging down the operating rates of secondary aluminum plants. Furthermore, tight aluminum scrap circulation and high costs affected production profits, forcing some enterprises to reduce production. Only 17% of enterprises reported an increase in operating rates, with some enterprises seeing a slight recovery in demand after mid-August, possibly rushing to fulfill previously backlogged orders, driving up production. In terms of inventories, finished product inventories at secondary aluminum manufacturers were low, and with unclear policies and falling aluminum prices, enterprises were cautious in purchasing aluminum scrap, resulting in low raw material inventories. Entering September, with the arrival of the consumption peak season and clearer policies, the PMI for the secondary aluminum industry is expected to rise above the threshold.
Brief Comment:
In August, after bottoming out, aluminum prices surged again to the 20,000 yuan mark. The off-season atmosphere in the downstream aluminum processing industry was strong, with only industrial extrusion, aluminum wire and cable, and primary aluminum alloy remaining above the threshold, insufficient to drive positive growth in the industry. The overall PMI for the aluminum processing industry remained below the threshold. For the upcoming traditional peak season, industrial extrusion is in a warming trend, and aluminum plate/sheet and strip, aluminum foil, primary aluminum alloy, and secondary aluminum are expected to see seasonal recovery. Domestic demand is likely to recover, coupled with the continued growth trend in export orders. SMM expects the domestic aluminum processing industry PMI to run above the 50 mark in September.
