Chinese aluminium processors operating rates up 0.3 percentage point W-o-W driven by higher demand from automobile sector

Last week during September 7-11, operating rates across major aluminium processors increased by 0.3 percentage point on a weekly basis to stand at 77.7 per cent, attributing to further recovery in orders for aluminium plate/sheet, strip, foil, primary and secondary aluminium alloy from the automobile, construction, electronics, and packaging sectors. According to Shanghai Metals Market, the automobile sector emerged as the major driver of aluminium demand last week, while demand from the construction and infrastructure sectors grew less than expected.

Aluminium plate/sheet and strip: Backed on the backlog orders, large producers are expected to sustain for the next 1 to 2 months with rising operating rates. Orders improved for most producers. Orders for 5-series and 6-series plain plate/sheet and strip showed signs of increase. New orders for can stock and can tab, however, increased at a very slower rate, but there were ample backlog orders.

Aluminium foil: Operating rates are likely to grow as demand for battery foil and electronics foil is improving. Demand for light-gauge packaging foil and soft packaging foil has also remained strong, but summer peak season for air conditioner foil has come to an end.

Aluminium wire and cable: New orders from State Grid and backlog orders allowed large producers to maintain stable operating rates. Orders at small and medium-scale producers also improved, leading to the increase in operating rates.

Aluminium extrusion: Operating rates at large aluminium extrusion producers dropped 0.5 percentage point last week, but going ahead they are likely to remain stable in the short term due to backlog orders. Slower-than-expected infrastructure projects, weaker new orders, and tighter cash-flows contributed to the fall in aluminium extrusion operating rates last week. Producers restocked in the second half of the week when aluminium prices trended down.

Primary and secondary aluminium alloy: Operating rates at primary aluminium alloy producers rose 3 percentage points week-on-week to stand at 62.2 per cent last week, buoyed by increasing orders. Increase in orders at aluminium wheel plants boosted demand for A356.2 aluminium alloy, resulting in higher production in Shandong and Inner Mongolia, while a producer in southwest China reduced output.

Secondary aluminium alloy operating rates are expected to grow in the short term amid bullish demand and bearish market share of imported aluminium alloy. Prices of domestic secondary aluminium alloy (ADC12) are expected to stabilise following gains driven by the peak season, lower supply of imported aluminium alloy and supply concerns of imported aluminium scrap. But in late September and early October, the price is likely to record a hike of RMB 200-300 per tonne.

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