Backlog orders shield aluminium processors operating rates in China last week

On surveying 41 major aluminium processors in 12 provinces across China last week, Shanghai Metals Market found their average operating rate dropped marginally by 0.6 percentage point on a weekly basis to 74.4 per cent. Backlog orders could be a reason behind this overall steady operating rate, in addition to the robust performance of construction-related processors and less effect on exports. But export orders for May are likely to fall sharply, creating an impact on the operating rates of aluminium plate/sheet, strip and foil producers, as the latter largely rely on exports for their business. Also, the operating rates this week may get slightly affected due to fewer exports off late.

Operating rates at major aluminium processors by industry (updated on April 10):

Aluminium extrusion: Operating rates at aluminium extrusion producers have also been taken care of by strong domestic demand at construction extrusion producers. Current orders at some of the construction extrusion producers could sustain production for at least a month. But industrial extrusion producers, on the other hand, reported fewer export orders, while some of them even remained pessimistic. Operating rates at construction extrusion producers are expected to remain largely stable in the short term but may decline at industrial extrusion producers. 

Aluminium plate/sheet and strip: Operating rates at large aluminium plate/sheet and strip producers were largely flat from a week ago. New orders declined sharply in early April, but backlog orders could allow producers to maintain full production this month. Producers are more concerned about orders for May and June amid global COVID-19, which are expected to affect output as well.

Aluminium foil: Operating rates at aluminium foil producers declined as COVID-19 hampered exports, with foreign clients cancelling or delaying orders. 

Aluminium wire and cable: Operating rates at large aluminium wire and cable producers dropped slightly. Current production is mostly based on orders received before the Chinese New Year. Production schedules for April are full at some producers, while others reported lower operating rates on order cancellation at some clients in Southeast Asia and South America due to COVID19.

Secondary aluminium alloy: Operating rates at large secondary aluminium alloy producers dropped 1.3 percentage points, as tighter aluminium scrap supply forced some small producers in Jiangxi, Zhejiang and Shandong provinces to shut down. 

Primary aluminium alloy: Operating rates at the top five primary aluminium alloy producers remained unchanged at 61.8 per cent. Wheel plants reduced raw material purchases due to falling domestic and export orders, forcing A356.2 aluminium alloy producers to cut output in early April. Alloy producers will focus on depleting inventories in the short term as operating rates at wheel plants are unlikely to recover significantly until automobile sales improve.