A356 alloy demand falls in June

SMM survey found that A356 alloy output at surveyed producers in June fell 2,000 mt from May due to mainly production cuts at some producers. The operating rate was also down 1.04% MoM to 55.70%. On the supply side, some aluminum smelters in Zhejiang and Henan cut production and some others produced aluminum ingot in preference to other products to meet demand from aluminum rod producers, precipitating a fall in overall supply. Shandong Innovation Metal, Shandong Nanshan Aluminum and Xinjiang Joinworld shipped to Zhejiang to make up for alloy shortages in the region.

With respect to demand, demand from wheel factories fell some for two factors. First, wheel manufacturers maintained low operating rates against higher temperature. Second, wheel factories built up sufficient stocks before the Chinese Dragon Boat Festival due to rising aluminum prices . Aluminum prices, however, pulled back immediately after the holiday, driving wheel producers to draw down inventories at hand, deterring any large-scale purchases.

As regards prices, supply and demand slipped in sync, keeping processing fees of A356 alloy for delivery to factory stable at RMB 600-650/mt.

Operating rates at wheel factories will fall further in July and August. SMM expects processing fees of A356 alloy to fall in the future, assuming supply remains little changed.