This week, the operating rate of China's downstream aluminum processing industry leaders was recorded at 64%, edging down 0.1 percentage point WoW, with significant divergence across sub-sectors. The operating rate of primary aluminum alloy edged up 1.2 percentage points WoW to 59.4%; although supply remained normal, demand recovery was slow, and the rate is expected to hold steady in the short term. The operating rate of aluminum plate/sheet and strip edged down 0.2 percentage points to 72.0%, with robust export orders offsetting weak domestic demand caused by high aluminum prices. The operating rates of aluminum wire and cable and aluminum extrusion held flat at 68.0% and 57.6% respectively; aluminum wire and cable benefited from a significant increase in aluminum stranded wire exports. Extrusion side, steady growth in home decoration orders partially offset the drag from weak real estate recovery, while industrial extrusion demand remained solid, expected to hold up well in the short term. The operating rates of aluminum foil and secondary aluminum producers declined 0.3 and 1 percentage point respectively to 73.3% and 53.9%, affected by multiple factors including fading peak season, air-conditioner foil drag, bill supervision tightening, and weakening demand, facing sustained downward pressure going forward. Overall, strong exports partially compensated for insufficient domestic demand, but high aluminum prices, cost pressure, and off-season factors continued to constrain the industry's upside room. Primary aluminum alloy: This week, the operating rate of China's industry leaders in primary aluminum alloy rose 1.2 percentage points WoW to 59.4%. Supply side, enterprises maintained normal production schedules overall. Some enterprises saw operating rates rebound recently as prior inventory had been largely depleted. Demand side, the aluminum price center shifted lower this month MoM, but downstream spot order quotes remained generally scarce, with the market primarily executing long-term contracts as usual. As downstream demand recovered slowly, primary aluminum alloy enterprises intensified competition for limited orders, leading to a slight increase in overall inventory. Overall, with aluminum prices maintaining current levels, the stimulus effect on downstream consumption remained limited. The operating rate of the primary aluminum alloy industry is expected to stay at current levels, likely remaining stable next week. Aluminum plate/sheet and strip: This week, the operating rate of aluminum plate/sheet and strip industry leaders edged down 0.2 percentage points WoW to 72.0%. Operations side, plate/sheet, strip and foil industry leaders maintained a generally stable production pace, but disrupted shipment pace had not yet eased due to persistently high aluminum prices and downstream speculative purchasing patterns. Orders side, stable domestic can stock packaging demand provided a floor; ESS sector battery casings, brazing materials and other products maintained high operating rates as downstream orders extended into Q3, forming a key support; auto sheets benefited from MoM rebound in new energy vehicle sales in May and strong exports, with orders recovering at the margin. Export side, a stronger overseas market significantly benefited China's exports, with enterprises reporting export orders already extended to late August and beyond, with full orders on hand. However, the domestic commodity plate market faced a severe situation: aluminum ingot average prices had long operated at a high level of 24,000 yuan/mt, civilian aluminum semis demand contracted sharply, fixed-price engineering orders were widely delayed as picking up goods meant immediate losses, and domestic orders showed signs of weakening. In the short term, although strong exports could offset some weak domestic demand, aluminum price fluctuation risks intensified, and enterprises tended to control production schedule pace while destocking simultaneously. The operating rate of aluminum plate/sheet and strip is expected to be under pressure in June. Aluminum wire and cable: The domestic aluminum wire and cable industry operating rate held steady at 68.0% this week, flat WoW. The industry operating rate stayed high during the week, mainly supported by strong export order activity. Resilient ex-China demand continued to drive enterprise production plans, and near-term industry orders remained focused on aluminum stranded wire export orders. In contrast, domestically, the pace of power grid construction project order placement was slower than expected at the beginning of the year. Recent power grid tenders were dominated by low-voltage and overhead lines, and the marginal boost from order production schedules to operating rates weakened. However, sustained volume growth in export orders effectively filled the gap in domestic demand, and the order structure continued to show a pattern of "strong exports, stable domestic." Under the current dynamic between high export growth and stable domestic demand, industry shipments maintained a dynamic balance, and operating rates are expected to remain resilient in the near term. Aluminum extrusion: The domestic aluminum extrusion operating rate held steady at 57.6% this week, with the industry continuing a mild operating trend overall. On the architectural extrusion side, home renovation orders maintained steady incremental growth recently. Combined with some enterprises having previously secured large-scale project orders such as supertall buildings and corporate headquarters, their volume advantage and longer delivery cycles provided sustained support for industry operations, partially offsetting the drag from weak real estate recovery. On the industrial extrusion side, demand in segments such as power systems, automotive lightweighting, and PV frames remained solid, supporting stable industry operations. Multiple large enterprises reported that May orders remained robust and held an optimistic outlook for June orders. However, some small and mid-sized industrial extrusion enterprises reported that to maintain healthy cash flow, they expect to moderately control order-taking to ease finished product inventory pressure. Some enterprises also proactively declined orders with low processing fees to maintain reasonable margins, leading to slight divergence in industry operations. Overall, off-season characteristics had not yet emerged, and the aluminum extrusion operating rate is expected to continue to hold up well next week. Aluminum foil: The operating rate of aluminum foil industry leaders pulled back 0.3 percentage points WoW to 73.3% this week. At the enterprise operation level, the traditional peak-season effect was gradually fading. Although orders on hand at industry leaders remained ample, structural divergence intensified. On the order side, demand for food packaging foil and pharmaceutical foil was at the tail end of the peak season, and domestic orders were set to face a seasonal pullback. Battery foil, on the other hand, benefited from robust battery end-use demand, with tight production schedules. However, the air-conditioner foil segment faced notable pressure: June household air conditioner domestic sales production schedules were sharply revised down YoY, downstream clients bargained aggressively, hydrophilic foil processing fees were running near cost, and the air-conditioner foil segment entered a downturn earlier than in previous years. In June, the packaging off-season effect and the drag from air-conditioner foil are expected to gradually dominate, with operating rates continuing to pull back. Secondary Aluminum: This week, the operating rate of secondary aluminum industry leaders fell 1 percentage point WoW to 53.9%, mainly weighed down by dual pressures from both the cost and demand sides. Cost side, invoice regulation continued to tighten with an expanded scope, and the shortage of compliant input invoices forced some secondary aluminum producers to cut production, significantly dampening their willingness to operate. Demand side, downstream consumption weakened further after June, with new orders for die-casting remaining sluggish. Although ADC12 prices were raised consecutively at the beginning of the week driven by costs, downstream buyers showed limited acceptance of high prices, restocking mainly on rigid demand with little willingness to rush to buy amid continuous price rise, and transaction volumes failed to increase in tandem. Overall, if invoice issues continue to escalate and the off-season deepens further, the industry operating rate still faces downward pressure.

[China Inventory Continued to Decline This Week, Aluminum Prices Show LME Outperforms SHFE in the Short Term] China inventory continued to decline this week but at a modest pace, limiting the upside elasticity of SHFE aluminum, with the divergence between domestic and overseas markets expected to persist in the short term. Key areas to watch going forward include whether China inventory destocking accelerates, whether the US-Iran deal can be formally signed, further clarity on the US Fed's rate path, and whether China is further tightening regulations on aluminum capacity operations. Overall, aluminum prices are expected to continue moving sideways in the short term, with LME outperforming SHFE.

In May, China's aluminum fabrication industry recorded an overall PMI of 50.8%, barely staying above the 50 mark but pulling back significantly by 3.1 percentage points from April. Industry sentiment slid from the edge of expansion territory toward the critical threshold, with structural divergence intensifying further.

[Rising Interest Rate Cut Expectations Boost Market Sentiment; Aluminum Prices Continue LME Outperforms SHFE Sideways Pattern] On the domestic front, driven by improved export profits, aluminum semis exports recovered somewhat and are expected to remain at a relatively high level in the short term. However, the pace of inventory destocking in China remained slow, spot aluminum transactions were lackluster, and downstream purchasing remained cautious, limiting SHFE aluminum's upside room. Overall, aluminum prices are expected to continue the LME outperforms SHFE sideways pattern in the short term.

This week, the operating rate of China's leading downstream aluminum processing enterprises was 64.1%, down 0.3 percentage points WoW.

Overall, the aluminum processing industry achieved a slight edge up in operating rate this week, driven by the recovery of export orders, the surge in energy storage demand, and the recovery of infrastructure-related orders. The industry maintained relatively strong resilience, and going forward, attention should be focused on the sustainability of export orders and the boosting effect of aluminum price trends on demand.

This week, operating rates across sub-sectors of China's aluminum processing industry continued their overall weak trend. The post-Labour Day holiday effect, combined with wild swings in aluminum prices, led to varying degrees of WoW pullback in operating rates across most sectors, with the overall rate recorded at 64.2%. Specifically, aluminum plate/sheet and strip operating rate fell to 72.6%, aluminum foil edged down to 74.7%, aluminum wire and cable recorded 66.6%, primary aluminum alloy rose slightly to 58%, leading secondary aluminum enterprises dropped to 57.0%, and aluminum extrusion operating rate also slipped slightly to 56.1%. Demand side, post-holiday aluminum prices fell by 480 yuan/mt in a single day, causing some traders to incur book losses, with cargo pick-up sentiment generally subdued. Underperforming real estate terminal completions continued to drag on construction extrusions and the air-conditioner foil segment within aluminum foil. PV frame enterprises also reduced their May production schedules, and passenger NEV growth falling short of expectations placed certain constraints on primary aluminum alloy. Overall, the consumption side was gradually showing traditional off-season characteristics. Cost side, high aluminum prices suppressed downstream enterprises' willingness to stockpile, compliant aluminum scrap sources remained tight with prices staying elevated, secondary aluminum industry profits continued to be under pressure, and some enterprises had already fallen into losses. However, aluminum wire and cable export orders continued to climb, with April expected to approach historical highs. Within aluminum extrusion industrial orders, heat sinks and industrial machinery accessories performed relatively well. Within aluminum foil, demand for food packaging foil, pharmaceutical foil, and battery foil remained stable. Automotive aluminum sheets & plates orders also benefited from the YoY and MoM double growth in April passenger NEVs, maintaining a recovery trend. Overall, in the short term, the aluminum processing industry's overall operating rate still faces downward pressure. The demand off-season and cost pressure form a dual suppression, and operating rates across sectors are expected to be under pressure in May. However, strengthening export orders and structural recovery in certain industrial demand segments will provide some bottom support for the industry. Primary aluminum alloy: This week, the primary aluminum alloy operating rate was 58%, showing a slight recovery WoW, but the rebound remained limited. Structurally, aluminum consumption at some enterprises increased, driving the overall operating rate slightly higher. However, most enterprises continued to primarily execute long-term contracts as normal, with overall operations running steadily. Current aluminum prices remained at elevated levels, suppressing downstream enterprises' willingness to stockpile, with most enterprises maintaining low inventory operations. Additionally, passenger NEV growth falling short of expectations also resulted in relatively slow demand growth. Overall, the primary aluminum alloy operating rate is expected to remain at the current level next week. Aluminum plate/sheet and strip: The operating rate of leading aluminum plate/sheet and strip enterprises edged down 0.4 percentage points WoW from pre-holiday levels to 72.6% this week. On the operational front, production lines at leading aluminum plate/sheet and strip enterprises ran normally during the Labour Day holiday with a steady production pace, but initial signs of operational pressure emerged in the industry. Post-holiday, aluminum prices pulled back, with a single-day drop of 480 yuan/mt. Some traders and dealers incurred book losses after purchasing, and sentiment for picking up goods was generally low. By product, domestic end-use demand for can stock packaging remained stable; auto sheets & plates orders benefited from the recovery of passenger NEVs in April with both YoY and MoM growth, still in a recovery trend; 1-series common plates and civilian general aluminum semis saw weak orders due to delayed cargo pick-up for engineering orders and shrinking civilian demand. In the short term, constrained by factors such as wild swings in aluminum prices and pressure on common plate orders, downward pressure on the operating rate of leading aluminum plate/sheet and strip enterprises is gradually increasing in May. Aluminum wire and cable: The operating rate of China's aluminum wire and cable industry registered 66.6% this week, edging down 1 percentage point WoW from pre-holiday levels. Although top-tier enterprises still held some power grid orders, they proactively reduced production loads due to the holiday factor and order losses, resulting in a decline in capacity utilization rate. Currently, domestic power grid end-use demand still dominates consumption, but the concentrated cargo pick-up cycle has passed, providing limited support to the overall industry operating rate. In contrast, export orders for aluminum stranded wire climbed, and Q2 exports are expected to increase significantly this year. April exports are expected to approach or break historical highs, and May exports are expected to increase by 10,000-20,000 mt MoM. Export orders will provide support to industry operations. Aluminum extrusion: The operating rate of China's aluminum extrusion industry was 56.1% this week, down 0.4 percentage points WoW, showing a generally stable but weakening trend. By segment, for architectural extrusion, dragged by domestic real estate terminal completion progress falling short of expectations, engineering orders continued their weak trend this week, and demand growth in the home decoration doors and windows segment was limited, failing to provide effective support, slightly dragging down the overall operating performance of architectural extrusion. For industrial extrusion, downstream tier-one PV module enterprises' May production schedule plans contracted, and PV frame enterprises saw a decline in operating rates. Some Hebei frame enterprises chose to shut down for 5 days during the Labour Day holiday to offset order pullback and ease cost pressure, maintaining a relatively full production schedule after the holiday; some Anhui frame enterprises reported that orders on hand remained generally stable with no significant reduction, resulting in relatively limited drag on operations. Additionally, large Guangdong aluminum extrusion enterprises reported that recent orders for heat sinks, industrial machinery accessories, and other industrial extrusion products performed well, providing support to regional industrial extrusion operations. In the short term, the weakness in architectural extrusion and the structural recovery in industrial extrusion offset each other, and the aluminum extrusion operating rate is expected to show a stable and improving trend. Aluminum foil: This week, the operating rate of leading aluminum foil enterprises fell 0.3 percentage points WoW from pre-holiday levels to 74.7%. Order side, demand for food packaging foil, pharmaceutical foil, and battery foil remained stable, supporting the baseline operating rate. Air-conditioner foil was under pressure, with May orders on hand declining MoM, as demand was dragged down by factors including a sluggish real estate market, tapering of national subsidies, high inventories outside China, and capacity relocation. Both domestic sales and export schedules declined, and weak end-use demand is expected to pull down the overall aluminum foil operating rate. In the short term, demand for packaging foil and battery foil can still support the aluminum foil operating rate at a relatively high level, but the deep weakness in air-conditioner foil will set the stage for an overall pullback in the aluminum foil industry's operating rate in May. Secondary aluminum: This week, the operating rate of leading secondary aluminum enterprises in China fell 0.7 percentage points WoW to 57.0%. During the holiday, sampled major plants maintained normal production, but affected by some downstream enterprises being on holiday and declining orders, enterprises compressed their production pace, and operating levels pulled back slightly. Currently, both demand and raw materials exerted dual pressure on production: on one hand, May gradually entered the traditional consumption off-season, downstream procurement became more cautious, market transaction activity continued to decline, and manufacturers' order performance was poor; on the other hand, finished alloy ingot prices fell more than raw material prices, compliant aluminum scrap sources remained tight with prices fluctuating at highs, industry profits continued to narrow, and some enterprises even fell into losses, with operating rates passively under pressure. After the holiday effect fades next week, the operating rate is expected to recover slightly, but the demand off-season and cost pressure are unlikely to improve significantly in the short term, and the industry's overall operating rate still faces downward expectations. [Data source statement: Data other than public information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.]

On April 7, the Phase II project with an annual output of 40,000 mt of construction aluminum extrusion at Shandong Jintong Hui Aluminum Co., Ltd., a key enterprise in the Huimin Economic Development Zone, broke ground. The project covers multiple segments including high-end construction aluminum extrusion production, processing, and R&D. Upon completion and commissioning, it will further improve the aluminum processing industry chain in the development zone and enhance the industrial agglomeration effect and core competitiveness.

This week, the weekly operating rate of leading downstream aluminum processing enterprises in China was flat MoM at 64.7%. such as can stock, energy storage, and automobiles. However, aluminum prices fluctuated at highs, exports to the Middle East were impeded, and some end-use consumption recovered less than expected, limiting upside room for the operating rate. The industry exhibited the characteristics of “steady with progress and structural divergence.”

In March, China’s composite PMI for aluminum processing registered 65.6%, rebounding strongly above the 50 mark.