China’s aluminium billets operating rate drops for the second month to 71.3%, driven by poor demand among extruders

The average operating rate of aluminium billet producers in China fell for the second consecutive month by 0.99 percentage point month-on-month, driven by the downfall in operations in east China, northwest China, and southwest China. According the Shanghai Metals Market data, China's domestic aluminium billets operating rate stood at 71.3 per cent in July 2022.

Only in north China, the operating rate increased, while that in central and south China remained flat M-o-M.

According to SMM survey, the production of aluminium billets rebounded in Inner Mongolia during July 2022 as some of the aluminium billet plants resumed operations that were suspended for maintenance in June. Some aluminium billets plants had also cut operations due to limited supply of molten aluminium in May and June. Nonetheless, the supply recovered in July, boosting the operating rate of domestic billet producers.

In July, the operating rate of downstream extruders slumped by 5.6 per cent month-on-month, particularly of construction and industrial extruders, which resulted in weaker operations at aluminium billet plants.

In Sichuan, local aluminium billet plants reduced their output significantly due to power shortage, which also contributed to the decline in operating rate. In early August, an accident in an aluminium smelter in Sichuan further affected the production of 190,000 tonnes of primary aluminium and 40,000 tonnes of aluminium billets.

As the operating rate of downstream extruders remained sluggish, resulting in poor demand, the in-plant inventory and social inventories of aluminium billets may continue to accumulate. Many enterprises have already warned that if there is no improvement in downstream orders in August 2022, they will consider cutting the output of aluminium billets. So, there is a chance of further decline in aluminium billets operating rate this month.