SHANGHAI, Jul 6 (SMM) — Operating rates across major aluminium processors decreased slightly by 0.3 percentage point from a week ago to 73.1% last week as orders declined with the arrival of the traditional off-season.  This decline is more prominent in real estate, transportation, and durable goods sectors. Operating rate of downstream processing enterprises is expected to fall further as impact of the off-season enlarges.

Primary aluminium alloy: The weekly operating rate of major primary aluminium alloy enterprises dropped to 59.2% as poor car sales, chip shortage and high temperature continued to suppress demand for primary aluminium alloy. The China Passenger Car Association (CPCA) predicted that the impact of chip shortage will be quickly alleviated in the near future and that chip shortage should be basically resolved by September with the release of more production capacity. A large primary aluminium alloy company reported an increase in new orders in July, but most producers said orders continued to decrease. It is expected that the operating rate of major primary aluminium alloy enterprises will decline further this week. Operating rate is unlikely to improve significantly until September when car makers end their summer break and chip shortage eases.

Aluminium plate and strip: The operating rate of major aluminium plate and strip enterprises fell by 2 percentage points to 86.8%. A growing number of producers reported declines in new orders, but sufficient orders on hand kept the overall operating rate at a relatively high level. Some downstream customers were bearish on aluminium prices and inactive in picking up their orders. Orders for can stock continued to outstrip other plate and strip products. As July-August is the traditional off-season, producers generally expect orders to gradually decrease.  Operating rate will likely to continue declining over the next two months.

Aluminium wire and cable: The operating rate of major aluminium wire and cable companies declined 0.4 percentage point. Some producers in Shandong and Henan cut production due to environmental protection and transportation restrictions before the 100th anniversary of the CPC founding. Producers in Jiangsu and Zhejiang were in normal production. Aluminium prices fluctuated between 18,700-18,800 yuan/mt last week. Restocking was driven by rigid demand amid strong bearish sentiment. Several projects of State Grid require delivery at the end of July. Large producers have sufficient orders on hand and are expected to increase production in July. Operating rate is expected to remain positive in the short term.

Aluminium extrusion: Operating rate of large aluminium extrusion enterprises was little changed. Most of the large producers have about one month of orders on hand, while small and medium-sized enterprises reported decline in orders. Domestic demand, especially demand for construction extrusion, declined, while industrial extrusion was little affected by the off-season. Exports did not improve due to overseas pandemic and high sea freight. The export volume of some companies has dropped by 20-30% year-on-year. Large producers restocked aluminium ingots and billets mostly under long-term orders. Orders fell sharply month on month in June and are expected to continue to decline in July, which will weigh on operating rate.

Aluminium foil: Operating rates at major aluminium foil producers fell to 87.9%. Producers generally see no increase in production and sales in July and August. Some companies said new orders decreased sharply. As aluminium prices have stabilised recently, many small and medium-sized enterprises have become more willing to produce. However, the overall operating rate and operating rate of large producers are expected to gradually decline in the off-season.

Secondary aluminium alloy: Operating rate of secondary aluminium alloy enterprises dropped further to 56.3%. The price of secondary aluminium followed aluminium prices down by 150 yuan/mt last week. New orders continued to decline due to the traditional off-season. Tight supply and high price of aluminium scrap forced some secondary aluminium companies to reduce production. One producer suspended production. Operating rate is expected to continue to fall slightly this week amid thin trades and downward pressure on prices.

Primary aluminium alloy: The weekly operating rate of major primary aluminium alloy enterprises dropped to 59.2% as poor car sales, chip shortage and high temperature continued to suppress demand for primary aluminium alloy. The China Passenger Car Association (CPCA) predicted that the impact of chip shortage will be quickly alleviated in the near future and that chip shortage should be basically resolved by September with the release of more production capacity. A large primary aluminium alloy company reported an increase in new orders in July, but most producers said orders continued to decrease. It is expected that the operating rate of major primary aluminium alloy enterprises will decline further this week. Operating rate is unlikely to improve significantly until September when car makers end their summer break and chip shortage eases.

Aluminium plate and strip: The operating rate of major aluminium plate and strip enterprises fell by 2 percentage points to 86.8%. A growing number of producers reported declines in new orders, but sufficient orders on hand kept the overall operating rate at a relatively high level. Some downstream customers were bearish on aluminium prices and inactive in picking up their orders. Orders for can stock continued to outstrip other plate and strip products. As July-August is the traditional off-season, producers generally expect orders to gradually decrease.  Operating rate will likely to continue declining over the next two months.

Aluminium wire and cable: The operating rate of major aluminium wire and cable companies declined 0.4 percentage point. Some producers in Shandong and Henan cut production due to environmental protection and transportation restrictions before the 100th anniversary of the CPC founding. Producers in Jiangsu and Zhejiang were in normal production. Aluminium prices fluctuated between 18,700-18,800 yuan/mt last week. Restocking was driven by rigid demand amid strong bearish sentiment. Several projects of State Grid require delivery at the end of July. Large producers have sufficient orders on hand and are expected to increase production in July. Operating rate is expected to remain positive in the short term.

Aluminium extrusion: Operating rate of large aluminium extrusion enterprises was little changed. Most of the large producers have about one month of orders on hand, while small and medium-sized enterprises reported decline in orders. Domestic demand, especially demand for construction extrusion, declined, while industrial extrusion was little affected by the off-season. Exports did not improve due to overseas pandemic and high sea freight. The export volume of some companies has dropped by 20-30% year-on-year. Large producers restocked aluminium ingots and billets mostly under long-term orders. Orders fell sharply month on month in June and are expected to continue to decline in July, which will weigh on operating rate.

Aluminium foil: Operating rates at major aluminium foil producers fell to 87.9%. Producers generally see no increase in production and sales in July and August. Some companies said new orders decreased sharply. As aluminium prices have stabilised recently, many small and medium-sized enterprises have become more willing to produce. However, the overall operating rate and operating rate of large producers are expected to gradually decline in the off-season.

Secondary aluminium alloy: Operating rate of secondary aluminium alloy enterprises dropped further to 56.3%. The price of secondary aluminium followed aluminium prices down by 150 yuan/mt last week. New orders continued to decline due to the traditional off-season. Tight supply and high price of aluminium scrap forced some secondary aluminium companies to reduce production. One producer suspended production. Operating rate is expected to continue to fall slightly this week amid thin trades and downward pressure on prices.