Slow demand and holidays affect operating rates of China’s secondary aluminium producers in September

Shanghai Metals Market reported that despite the tradition high season in China, poor consumption in the downstream auto sector negatively affected the operating rates across Chinese secondary aluminium plants in September YoY. Auto sale in China has been on a downtrend for last few months.

Operating rates across secondary aluminium producers averaged 58.25% in September, down 5.05 percentage points from a year ago but up 5.13 percentage points from August.  

Working days picked up in September from August across downstream die-casting plants after the summer breaks. This has driven the month-on-month increase in operating rates. However, very few downstream plants did restocking before the National Day holiday and the Mid-Autumn festival bringing down the actual demand year on year.

SMM expects the low operating rate to continue in October and extend further to around 58%. Post-holiday purchases continue to remain thin across downstream sectors. Low operating rates were further encouraged by longer holiday breaks by die-casting plants during the National Day holiday.  As reported, some secondary aluminium producers would conduct maintenance in October conforming to strict environmental rules. This will also weigh on the operating rates of secondary smelters.

Data from China Association of Automobile Manufacturers shows that sales and production of cars extended their weak performance in September. Production of cars dropped 11.7% from a year ago to 2.356 million units, but up 17.8% from August. Lacklustre demand from auto sector had a negative effect on secondary production.