SMM, January 23, 2025:
This week, the operating rate of leading downstream aluminum processing enterprises in China continued to drop significantly by 6.3 percentage points WoW to 51.1%. This week marked the last trading week before the Chinese New Year, and the operating rates across various aluminum processing sectors generally declined due to the holiday. The operating rate of primary aluminum alloy fell to 51%, with some enterprises beginning to slow production or conduct maintenance, and further production cuts are expected during the holiday. Downstream customers in the aluminum plate/sheet and strip and aluminum foil sectors have completed stockpiling, resulting in sluggish transactions during the week and a subsequent reduction in operating rates. However, production is expected to remain normal during the holiday. As the holiday period is concentrated this week and next week, the operating rates in the wire and cable, extrusion, and secondary alloy sectors saw larger declines and are expected to continue to drop significantly next week. Overall, the operating rates across all downstream aluminum sectors weakened significantly due to the Chinese New Year break. According to SMM forecasts, the operating rate of leading downstream aluminum processing enterprises in China is expected to drop further by 7.5 percentage points next week to 43.6%.
Primary Aluminum Alloy: This week, the operating rate of leading primary aluminum alloy enterprises in China recorded 51%, down 4% WoW. In the last week before the Chinese New Year, although more than half of the enterprises have not yet adjusted their plans and are expected to maintain normal production during the holiday, some enterprises reported that they are still fully engaged in taking orders and production. However, some enterprises have chosen to slow down production, with northern customers indicating that the operating rate during the Chinese New Year month may drop by 10-20% compared to normal levels. Some enterprises are also using the holiday period for shutdown maintenance. As a result, the operating rate of primary aluminum alloy has weakened overall this week. Entering the Chinese New Year holiday next week, some enterprises are expected to further reduce liquid aluminum production, with expectations for production cuts during the holiday, leading to a significant weakening of the industry's operating rate.
Aluminum Plate/Sheet and Strip: This week, the operating rate of leading aluminum plate/sheet and strip enterprises dropped by 3.6 percentage points to 63%. As downstream customers have completed stockpiling or started their holidays, actual transactions in the aluminum plate/sheet and strip market were sluggish this week, prompting leading enterprises to adjust their production schedules. During the Chinese New Year, leading plate/sheet and strip enterprises are generally expected to maintain normal production, with operating rates remaining stable in the short term.
Aluminum Wire and Cable: This week, the operating rate of leading aluminum wire and cable enterprises in China recorded 53%, down 7% WoW. According to SMM, leading aluminum wire and cable enterprises have also entered the holiday period, and with the recent industry order delivery periods not being concentrated, enterprises showed low willingness to stockpile finished product inventories in advance, resulting in a significant drop in operating rates. Regarding orders, the State Grid added few new orders at the end of the year, and new energy grid connections are expected to regain momentum after the holiday due to prior stockpiling. Enamelled wire shipments weakened due to enterprise shutdowns. In summary, SMM believes that the aluminum wire and cable industry is significantly affected by the Chinese New Year holiday in the short term, with operating rates expected to continue declining next week.
Aluminum Extrusion: This week, the operating rate of domestic aluminum extrusion enterprises recorded 27.5%, down 8 percentage points WoW, mainly due to the domestic aluminum processing sector entering the Chinese New Year holiday period. Enterprises in south China began their holidays and production halts last week, while some aluminum extrusion plants in east China also started their holidays, leading to a significant decline in operating rates. However, compared to previous years, automotive extrusion orders remained moderate, supporting enterprise operating rates, and related enterprises remain optimistic about post-holiday demand. PV module production schedules for January-February fell below 40GW, but considering the holiday closures of aluminum extrusion plants, the decline in module plant procurement volumes was limited, providing support for the operating rates of related extrusion plants. Overall, the aluminum extrusion industry has entered the Chinese New Year holiday, and SMM will continue to monitor post-holiday operating conditions.
Aluminum Foil: This week, the operating rate of leading aluminum foil enterprises dropped by 2.6 percentage points to 71.4%. The aluminum foil market experienced minimal fluctuations as the year-end approached, with leading enterprises generally maintaining their previous production pace, though shipments were temporarily delayed. With the Chinese New Year approaching next week, the industry is not expected to see significant changes, and the operating rate of the aluminum foil sector is expected to remain stable.
Secondary Aluminum Alloy: This week, the operating rate of leading secondary aluminum enterprises dropped significantly by 12.5 percentage points WoW to 40.6%. As this week marked the last week before the holiday, most enterprises began their holidays after Monday, with leading enterprises scheduling their holiday period from January 24-27 and resuming work around February 5 (the eighth day of the lunar new year). Some enterprises have not yet determined their specific resumption dates, which will depend on the holiday schedules of downstream customers. Sample enterprises reported furnace shutdown durations ranging from 4 to 12 days. This week, secondary aluminum plants gradually stopped taking orders, and with downstream holidays, production halts, and logistics suspensions, market transactions became increasingly sluggish. Affected by the Chinese New Year holiday, the operating rate of the secondary aluminum sector is expected to weaken further next week.
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(SMM Aluminum Team)
