
According to Shanghai Metals Market, operating rates across Chinese processors of aluminium plate, sheet, and strip are estimated to decline to 65 per cent in January, down three percentage points from the revised reading in December. On a yearly basis, operating rates in January are expected to decline two percentage points, SMM learned.

The reason behind this estimated fall in downstream aluminium operating rates in January could be the week-long Chinese New Year break as it affected some operations. While some processors started their CNY holiday as early as on January 20, reducing the average operating rate in the industry.
On the other hand, though some large-sized firms with annual capacity above 150,000 tonnes maintained stable operation during the holiday, their year-end maintenance on equipment affected production by up to three days.
Suspension of logistic services ahead of CNY buoyed delivery costs, and this also capped production at those processors.
As SMM forecasts, overcapacity issue is likely to continue in the aluminium plate, sheet, and strip processing industry even in 2019. Competition for market share is estimated to further weigh on processing fees, but there is still room for profit margins.
However, a large number of processors are optimistic about production in March given their current unfulfilled orders. SMM learned that downstream orders from the construction sector improved and from metal packaging remained stability, but orders from the electronic product sector weakened in slack season.
In January, the ratio of raw materials inventory to the estimated output at those processors for February stood at 15.3 per cent, compared with 11.8 per cent in December as processors stockpiled for CNY. High in-plant inventories of raw materials are likely to ease from February 10. The ratio of finished products inventory to the estimated output for the same month came in at 40.9 per cent, up from 39.2 per cent in December.
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