Coronavirus Outbreak affects China’s aluminium processing PMI to record low to 34.7 in February

Amidst the outbreak of epidemic Coronavirus, China’s aluminium processing industry recorded a sharp decline in February. The outbreak of the virus kept plants shut until the second half of the month and reduced new orders. 

The latest Shanghai Metals Market survey showed the composite purchasing manager’s index (PMI) across manufacturers of aluminium sheet/plate and strip, foil, wire and cable, construction and industrial extrusion, primary and secondary alloy in China dropped to 34.7 in February, marking the lowest since SMM began to conduct monthly survey in May 2018. 

Sub-index of production plunged from 20.6 in January to 19.7 in February and reading of new orders from 36.1 to 25. Labour conditions remained tight as well, due to travel restrictions; sub-reading for employment declined from 49.9 to 41.8.

Among all the aluminium semi-fabricated products, the aluminium wire and cable sector recorded the worst performance in February, with the PMI falling from 33.3 in January to 28.2 in February. Most of the aluminium wire and cable companies were closed in China until at least February 20. Labour issues also deterred them from ramping up operations. Arrivals of new orders from state grid operators and other projects dwindled too in January and February.

The large producers of aluminium wire and cable are estimated to take a minimum of two to four months to recover to normal production. 

The Coronavirus hit on aluminium industrial extrusion sector is appeared to be softer. As industrial extrusion producers resumed work earlier than those of construction extrusions and saw better orders, the PMI of the sector dropped relatively lesser to 43.3 in February than the seven other processing sectors. The PMI of aluminium construction extrusion producers slipped to 31.4 from January 36.3, as orders from the domestic market reduced. Delay in resumption due to labour issues was also a reason behind the drop in PMI of aluminium construction extrusion producers. 

In March, activity across aluminium industrial extrusion producers is expected to improve substantially.

The PMI of aluminium foil and aluminium sheet, plate and strip inched down to 32 last month from 33 in January and to 38 from 45.3, respectively. Large scale aluminium sheet, plate and strip producers scaled back operations until late February, while small and medium-sized ones remained shut. The latter have although started operating but are yet to recover to normal, owing to labour issues, constrained shipments, and slow cash recovery. 

The PMI for the primary aluminium alloy sector dipped to 40.2 in February, as large and medium-sized alloy producers had suspended production since the beginning of February.

Secondary aluminium producers also reopened late, with small and medium-sized ones remaining closed until the end of February due to manpower and road transport issues. The resumption of their clients also delayed, resulting in reduced orders for secondary aluminium alloy and increased inventories at producers. 

 The secondary aluminium sector is expected to return to growth in March on the back of the recovery of demand and raw material supply.