SMM

Last week, the operating rate of leading domestic aluminum wire enterprises recorded 71.8%, a slight increase of 0.2% WoW. Driven by strong policies, orders related to power grid construction have been pouring in since the beginning of the year. Despite the downstream aluminum sector entering the off-season, the operating rate of aluminum wire and cable showed resilience, even rebounding slightly at the beginning of December. According to feedback from enterprises, the current production focus is on provincial grid overhead line orders. Although the operating rate in some regions has declined compared to November, top-tier enterprises are still operating at full capacity, aiming to complete delivery tasks by year-end. Based on the production schedules of enterprises, SMM expects the operating rate of aluminum wire and cable to remain stable in the short term, with a potential turning point appearing in mid to late December.

Aluminum Rod Section: Last week, aluminum prices fluctuated rangebound, and aluminum rod processing fees varied across regions. On December 6, 2024, the ex-factory average processing fee for 1A60 ordinary aluminum rods in Shandong was 400 yuan/mt, up 50 yuan/mt WoW; in Henan, the processing fee for 1A60 aluminum rods was also 400 yuan/mt; in Inner Mongolia, the ex-factory average processing fee for 1A60 aluminum rods was 250 yuan/mt; in South China, the average processing fee on delivery-to-factory basis for ordinary rods was 550 yuan/mt; in Hebei, the average processing fee on delivery-to-factory basis for 1A60 aluminum rods was 400 yuan/mt, down 50 yuan/mt WoW; in Jiangsu, the average processing fee on delivery-to-factory basis for 1A60 aluminum rods was 500 yuan/mt, down 50 yuan/mt WoW.

Supply side, the operating capacity of aluminum rod plants remained generally stable, with only a few plants experiencing slight production declines due to liquid aluminum issues. Overall, the supply of aluminum rods in November was mainly stable or slightly increased. SMM will conduct further surveys and statistics on specific data. Demand side, as the year-end approaches, orders related to ultra-high voltage were mostly delivered by the end of October, followed by a gradual tightening of provincial grid distribution network orders. Due to enterprises rushing to meet year-end delivery deadlines and low raw material inventory levels, the demand for 1-series electrical round aluminum rods increased, with some markets seeing concentrated purchases. The supply-demand pattern for aluminum rods improved, and the processing fees showed initial signs of standing firm on quotes. In the short term, aluminum rod processing fees may have some upward potential. However, as the year-end approaches, terminal picking up goods may slow down, and downstream focus will shift to payment collection issues, potentially leading to a turning point in the operating rate. Demand may gradually weaken in mid to late December, and with overall supply remaining relatively unchanged, aluminum rod processing fees may face downward pressure for adjustment.