Operating rates at aluminum extrusion producers to inch down in July

SMM expects the average operating rate at construction aluminum extrusion producers during July to fall by 3.5% MoM to 67%. The average operating rate at industrial aluminum extrusion producers in July will remain essentially unchanged from June’s 47% given continued sluggish condition in the transportation and machinery sectors.

Summer is a seasonal low-demand period for the aluminum extrusion sector as current high temperatures are slowing housing construction and demand, which erodes production efficiency at aluminum extrusion producers. Tightening liquidity in the real economy will also erode demand for aluminum extrusion.

The Chinese government’s RMB 4 trillion stimulus in 2009 set off a boom in housing, transportation, and machinery. This boosted demand for aluminum extrusion and drove operating rates higher. Factoring out Q1 figures due to the variable impact of the Chinese New Year holiday each year, there was a continuous YoY growth in operating rates at aluminum extrusion producers from April 2010 through September 2011, largely as a result of the RMB 4 trillion in investment.

The real economy again slipped into recession from the second half of 2011, cutting into demand for aluminum extrusion. As a consequence, operating rates at aluminum extrusion producers slid progressively lower on a year-on-year basis throughout 2012.

Operating rates began to pick back up only this past May as consumption began to recover.