SMM, October 18, 2024 - Last week, the operating rate of leading domestic aluminum wire enterprises remained at 72%, stable compared to previous week. Due to the need to complete ultra-high voltage orders by the end of this month, enterprises still faced heavy production tasks, showing no signs of a decline in the operating rate in the short term. Currently, apart from ultra-high voltage orders, the overall performance of photovoltaic wind power orders, low-voltage aluminum wire orders, and export orders was moderate, with a slight increase in finished product inventories to prepare for the upcoming peak delivery period. Regarding new orders, this week saw the announcement of the winning bid results for the distribution network agreement inventory in Ningxia and the candidate for the physical agreement inventory in Qinghai, supplementing the orders for overhead and low-voltage aluminum wires, with deliveries concentrated in January 2025. This reflects the saturated production tasks of top-tier enterprises in 2024. However, whether the operating rate can remain high in November and December this year depends on whether other orders can fill the delivery gap. It is expected that the operating rate will remain stable in the short term.
Regarding aluminum rods, the domestic aluminum rod market was influenced by various factors, including the strengthening of the domestic aluminum wire industry, the trend of aluminum alloying, and the continued low aluminum billet processing fees. As a result, the operating capacity of aluminum rod enterprises continued to rise this year, with a high operating rate and a relatively ample supply of aluminum rods. According to SMM data, the operating capacity of domestic aluminum rod enterprises in September was 7.488 million mt, with a production of 378,000 mt. After excluding the impact of the number of days in the month, production increased by 1.6% MoM, the operating rate increased by 1% MoM, and by 1.2% YoY. This indicates a stable and improving operating state for aluminum rods. However, the increase in aluminum rod supply was not effectively absorbed downstream. Even though downstream enterprises had sufficient orders, fluctuations in raw material prices pressured the profits of small and medium-sized enterprises, resulting in a low operating rate and further affecting the demand for aluminum rods, causing aluminum rod processing fees to fluctuate downward.
According to SMM, as of this Friday, the ex-factory processing fee for ordinary rods in Shandong was 450 yuan/mt; in Henan, it was 400 yuan/mt; in Inner Mongolia, it was 300 yuan/mt; the delivery-to-factory processing fee in Guangdong was 600 yuan/mt; the average delivery-to-factory processing fee in Hebei was 450 yuan/mt, and in Jiangsu, it was 550 yuan/mt. This week, aluminum rod processing fees showed little change overall. Due to the decline in aluminum prices, processing fees slightly rebounded. In specific regions, aluminum rod enterprises in Shandong mainly stood firm on quotes, while in Inner Mongolia, due to increasing in-plant inventory pressure, processing fees were lower with more low-priced sources in the market. In Guangdong, supported by end-use orders from the Southern Grid, aluminum rod processing fees remained stable. In summary, the operating capacity of aluminum rod enterprises is expected to remain stable in the short term, with increasing supply pressure. End-use enterprises are still waiting for a recovery in order profits, and in the short term, they will mainly purchase based on immediate needs, lacking upward momentum in aluminum rod processing fees, which are expected to continue fluctuating downward.
