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SMM

PMI for the aluminium processing industry reached 53.3 per cent in August, with structural recovery for Sept-Oct peak season

12MINS READ

The PMI of various aluminium processing sectors showed significant divergence in August, with the aluminium plate/sheet and strip industry standing out notably. Its composite PMI surged 17.1 percentage points to 60.5 per cent, marking a strong return to expansion territory. Seasonal stockpiling in downstream sectors such as automotive, 3C electronics, can stock, and curtain wall panels drove M-o-M order growth for enterprises. Previously idled cast-rolling lines gradually resumed production, boosting operating rates for consecutive periods. Although the industry remained cautious about the September-October peak season and faced localised logistics constraints, overall production was not significantly impacted.

Percent graphic growth SMM
Image for representational purposes only

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The aluminium foil sector’s PMI remained in contraction territory (46.3 per cent ) but improved marginally M-o-M, though overall production and sales momentum stayed weak. Air-conditioner foil was notably dragged down by declining end-user production schedules. However, battery foil and brazing foil orders remained stable, while decorative foil, household foil, and packaging foil consumption improved M-o-M, with top-tier enterprises stabilising their production schedules.

The architectural extrusion PMI edged up to 47.80 per cent, reflecting weak off-season demand. The positive effects of real estate policies have yet to translate into industrial demand. Small and medium-sized enterprises, burdened by long payment cycles and declining processing fees, showed low willingness to take orders. Export orders performed well, with incremental demand for doors, windows, and curtain walls in Southeast Asia and Africa.

The industrial extrusion PMI recorded 48.52 per cent, remaining in contraction. PV frame manufacturers maintained high operating rates due to the export rush effect, but automotive extrusion faced overcapacity and intense "rat race" competition in processing fees, accelerating industry consolidation.

The aluminium wire and cable industry’s PMI rebounded significantly to 52.1, re-entering expansion territory, driven by power grid projects’ advance stockpiling for the peak season. However, orders for PV/wind power and enamelled wire remained weak.

Primary alloy PMI stood at 59.4 per cent, maintaining robust expansion with strong export performance, though weak domestic demand and trade policy uncertainties warrant attention. Secondary alloy PMI rose 11.5 percentage points M-o-M to 49.5 per cent  but remained below the 50 mark. Demand was suppressed by high-temperature holidays, while aluminium scrap supply tightness, the cancellation of tax rebates, and environmental protection inspections pressured small and medium-sized enterprises, though large firms remained relatively stable.

By product category:

Aluminium plate/sheet and strip: In August, the PMI for the aluminium plate/sheet and strip sector rose 17.1 percentage points M-o-M to 60.5 per cent, surging well above the 50 mark. Sub-indices showed both the production index and new orders index closed at a high of 68.9 per cent, while export orders rebounded to 62.0 per cent, reflecting a synchronised recovery in domestic and external demand, with enterprises reporting solid order intake.

The purchasing volume index rose in tandem to 60.5 per cent, and the raw material inventory index reached 53.5 per cent, indicating active stockpiling by firms to prepare for peak season and improved confidence. On a weekly basis, aluminium prices stabilised within the range of RMB 20,500-20,800 per tonne in early-to-mid August, triggering seasonal stockpiling in downstream sectors such as automotive, 3C electronics, can stock, and curtain wall panels. Orders increased M-o-M from July, and previously idled casting-rolling lines gradually resumed operations, driving consecutive gains in operating rates.

Although industry expectations for the September-October peak season remain cautious and localised logistics disruptions occurred temporarily, overall production pace saw no significant disruption. With further recovery in end-use consumption, the PMI for aluminium plate/sheet and strip is expected to maintain a steady upward trend in September.

Aluminium foil: The aluminium foil sector's PMI stood at 46.3 per cent in August, remaining in contraction territory but showing marginal improvement from the previous month. Key sub-indices included production and new orders indices, both at 43.4 per cent, reflecting persistently weak production and sales momentum, particularly as air-conditioner foil orders contracted YoY due to reduced end-user production schedules, significantly dragging down the sector. The input price index reached 49.9 per cent, nearing the 50 mark, indicating eased cost pressure.

Weekly data showed the sector bottoming out in August, supported by stable orders for battery foil and brazing foil, alongside M-o-M demand recovery in decorative foil, household foil, and packaging foil segments, with top-tier enterprises stabilising production schedules. Although the air-conditioner foil peak season has passed, weakening demand support, the approaching September-October peak season is expected to generate additional orders from home appliance and new energy end-users.

The aluminium foil PMI is projected to return above the 50 mark in September, with market focus on production schedule adjustments and actual restocking intensity.

Construction aluminium extrusion: The composite PMI for construction aluminium extrusion edged up to 47.80 per cent in August, remaining below the 50 mark. August was still in the traditional off-season. Despite frequent positive news on real estate stimulus during the period, companies reported it would take time to translate into industry impact.

The production index stood at 46.48 per cent this month. According to the SMM survey, most companies reported flat orders M-o-M. Some small and medium-sized enterprises in Guangxi and Zhejiang reported weak order-taking willingness due to prolonged payment cycles and declining processing fees for construction aluminium extrusion.

A medium-sized building materials company in Zhejiang noted a roughly 30 per cent drop in infrastructure-related orders. Although some companies reported nearly stable new orders M-o-M, the new orders index dipped to 46.48 per cent due to declines at other firms. The new export orders index rose to 51.65 per cent, driven by increased shipments of doors, windows, and curtain walls to Southeast Asia and Africa by companies in Anhui, Hunan, and Shandong. For raw material inventory, most companies maintained only 7-day safety stock, with the raw material inventory index at 44.82 per cent. With the approaching September-October peak season, the construction aluminium extrusion PMI is expected to have further upside room.

Industrial aluminium extrusion: The composite PMI for industrial aluminium extrusion recorded 48.52 per cent in August, staying below the 50 mark. Sub-indices showed the production index at 49.84 per cent and the new orders index at 46.33 per cent, reflecting off-season effects. Per the SMM survey, most companies reported flat orders M-o-M, while some voluntarily cut production due to lower processing fees. Leading PV frame manufacturers in Anhui and Hebei maintained high operating rates in August, supported by the export rush ahead of the PV product export tax rebate cancellation. Other industrial extrusion segments like rail transit, radiators, and 3C deep-processing firms reported order increases. Automotive extrusion producers noted stable but slightly weaker production and new orders M-o-M.

A large extrusion company in Shandong stated that overcapacity in automotive extrusion remains hard to reverse, with capacity increasingly concentrated among leading enterprises amid limited market orders. The severe "rat race" competition in processing fees is unlikely to ease, raising concerns about future market prospects. Against the seasonal transition, some Hebei-based companies accelerated end-user cargo pick-ups to avoid logistics controls during the September 3 military parade, reducing finished product inventories. The finished goods inventory index dropped to 45.07 per cent. Overall, industrial aluminium extrusion showed early signs of recovery, with its composite PMI expected to rebound above the 50 mark in September.

Aluminium wire and cable: In August, the composite PMI for China's aluminium wire and cable industry registered 52.1 per cent, up 4.4 per cent M-o-M from July. The PMI's return above the 50 mark indicates the industry has re-entered an expansion cycle, ending two consecutive months of contraction. August marked a critical transition period from the off-season to the peak season for the aluminium wire and cable industry. On one hand, power grid projects resumed construction cycles in September, accelerating end-user cargo pick-up. On the other hand, the "aluminium-for-copper" substitution trend in end-use consumption provided a consumption boost.

Breaking down by segment, the production PMI in August reached 58.21 per cent, up 10.5 per cent M-o-M, primarily due to manufacturers' proactive production stockpiling to alleviate future cargo pick-up pressure. The finished product inventory index stood at 60.3 per cent. As order fulfilment intensified, manufacturers gradually entered a busy production phase, with the operating rate expected to rise further in September. The production PMI is projected to reach 60 per cent in September.

Regarding new orders, industry orders remained sluggish in August. PV and wind power orders plummeted due to reduced grid connections following policy deadlines, while enamelled wire orders weakened amid the phase-out of home appliance subsidies. Power grid-related orders saw only sporadic fulfilment during the month.

Other aspects: The price centre softened slightly during the month, prompting manufacturers to restock raw materials for rigid demand in advance. The raw material inventory index registered 58.42 per cent, up 24 per cent M-o-M. Looking ahead to September, SMM believes the industry is currently in a preparatory phase before demand expansion. With the approaching power grid construction cycle and annual investment support, aluminium wire and cable demand is expected to see strong incremental growth. The industry PMI is projected to remain above 50 in September.

Primary aluminium alloy: In August, the primary aluminium alloy PMI recorded 59.4 per cent. Despite July and August being traditional off-season months, the industry maintained steady performance above the 50 mark. By component, the production index reached 70.2 per cent, and the new orders index stood at 65.4 per cent, both remaining at relatively high levels. This aligns with the overall recovery in the operating rate of primary aluminium alloy in August. While operating capacity in primary processing segments like aluminium billet remained volatile, primary aluminium alloy production continued to gain momentum. Orders, particularly for downstream finished product exports, also showed promising performance, indicating relatively strong production and order activity.

The product inventory index registered 53.0 per cent, and the purchasing volume index reached 68.5 per cent, reflecting reasonable inventory levels and active procurement activities. This suggests stable inventory management and raw material procurement practices among enterprises. The new export orders index remained robust at 65.4 per cent, though external demand uncertainties persist, requiring continued monitoring of factors such as Sino-US tariffs.

Industry outlook: Although the primary aluminium alloy PMI performed impressively in August and SMM holds a positive outlook for September, challenges remain, including weak domestic demand, trade policy uncertainties, and potential impacts of high aluminium prices. Whether the industry can sustain its strong performance will depend on the actual recovery in demand as the traditional peak season begins in September, as well as changes in external factors.

Secondary aluminium alloy: In August, the PMI for the secondary aluminium industry rebounded by 11.5 percentage points M-o-M to 49.5 per cent, but remained below the 50 mark. The demand side was dominated by off-season sentiment, and some downstream enterprises concentrated their high-temperature holidays from late July to mid-August, further suppressing purchase willingness. After mid-August, demand stabilised and rebounded.

Delivery brand companies continued to fulfil previous orders, providing some support to corporate orders. Production showed structural divergence: large enterprises generally maintained high operating rates, though some saw slight production cuts due to high-temperature holidays in the automotive industry. Small and medium-sized enterprises faced widespread pressure, with order contraction compounded by multiple constraints:

1) A persistent tight supply of aluminium scrap hindered raw material inventory replenishment.

2) cancellation of tax rebate policies in Anhui and Jiangxi prompted proactive production cuts to mitigate cost risks;

3) Environmental protection inspections in Hebei and Jiangxi led to regional production halts. Both finished goods and raw material inventories remained at low levels.

With the approach of the September peak season, downstream demand showed mild recovery, and the industry PMI is expected to rise above the 50 mark in September.

Brief review:

The PMI for the aluminium processing industry in August was recorded at 53.3 per cent, reflecting a significant improvement over July and signalling a positive transition from off-season to peak season. The aluminium plate/sheet and strip industry emerged as the brightest spot, with simultaneous recovery in domestic and overseas demand driving notable rebounds in orders and production, while stockpiling enthusiasm strengthened, marking the industry's entry into expansion territory.

Although the aluminium foil sector remained in contraction territory, marginal recovery trends emerged, with battery foil and packaging foil showing M-o-M improvements, supported by peak season expectations.

The extrusion segment continued to face pressure, with construction extrusion dragged down by sluggish real estate, highlighting survival challenges for small and medium-sized enterprises. Industrial extrusion exhibited structural divergence, with PV orders supporting some firms, but automotive extrusion faced severe overcapacity and intense processing fee competition. The aluminium wire and cable industry benefited from power grid peak season stockpiling in advance, with PMI re-entering expansion territory and production and inventory indices rising sharply, indicating clear demand growth prospects.

Primary alloy maintained steady expansion, with production and order indices fluctuating at highs and strong export performance, though domestic demand sustainability remained uncertain. Secondary alloy stayed below the 50 mark, with tight raw material supply and policy changes constraining production for small and medium-sized enterprises, reinforcing industry consolidation trends.

Overall, the aluminium processing industry gradually recovered in August amid expectations for the September-October peak season, but the recovery pace varied across segments, and the breadth and sustainability of demand recovery require further observation. As end-use consumption continues to recover, the aluminium plate/sheet and strip, wire and cable, and primary alloy sectors are expected to lead industry expansion in September, while marginal improvements are anticipated for aluminium foil and extrusion segments.

However, attention must be paid to potential impacts from aluminium price volatility, policy shifts, and external uncertainties on industry recovery.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.

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