Aluminium processing industry halts and cuts production during Chinese New Year holiday, composite PMI falls below the 50 mark

SMM

In late January, aluminium processing enterprises largely entered the Chinese New Year break, halting production. Only a few large enterprises maintained operations, but their production was significantly lower than usual, leading to a sharp decline in this month's production index, which recorded 24.2 per cent. Additionally, due to the previous ‘rush to export’ activities, overseas end-use customers were still digesting large inventories. Coupled with the impact of the traditional off-season, the new orders index remained at a low level, recording 38.1 per cent.

Aluminium processing industry halts and cuts production during Chinese New Year holiday, composite PMI falls below the 50 mark

According to the SMM survey, the aluminium processing industry generally believes that end-use demand recovery will occur after the Chinese New Year break in February. With the dual reduction in production and order volumes, raw material procurement volumes also declined accordingly. Furthermore, due to the continued weakness in end-use consumption in recent years, enterprises are more inclined to procure and produce based on actual demand. As a result, the raw material inventory index stood at 59.5 per cent, while the finished product inventory index was 47.1 per cent.

Breaking down by product type

Aluminium plate/sheet and strip ↓In January, the PMI for the aluminium plate/sheet and strip industry was 37.2 per cent, up 3.9 points M-o-M. This month, environmental protection inspections in Henan eased, allowing some affected production lines to resume operations. Additionally, backlog orders were temporarily delayed due to the previous ‘rush to export’, which was concentrated on production and delivery before the Chinese New Year break, leading to a rebound in operating rates. However, regarding foreign trade orders, leading enterprises are yet to achieve substantial breakthroughs after the first round of negotiations with customers. Combined with the continued weakening of domestic market demand, the industry's PMI remained below the 50 mark. With the arrival of February, small and medium-sized plants are expected to gradually resume production after the Chinese New Year, and the PMI for the aluminium plate/sheet and strip industry is expected to show an upward trend next month.

Aluminium foil ↓In January, the PMI for the aluminium foil industry was 37.1 per cent, down 11.7 points M-o-M. January coincided with the domestic off-season, and the newly introduced national subsidy policy did not immediately boost new orders for related aluminium foil enterprises producing air-conditioner foil, battery foil, and capacitor foil. Additionally, the cancellation of aluminium semis export tax rebates and the continued digestion of large inventories by overseas end-use customers due to the ‘rush to export’ further impacted the industry. Overall production and sales in the industry continued to decline. After the Chinese New Year break in February, the sustained impact of the national subsidy policy and restocking by overseas customers after depleting raw material inventories may become key points determining whether the industry's PMI rebounds.

Construction aluminium extrusion ↓In January, the composite PMI for the construction aluminium extrusion industry recorded 42.34 per cent, slightly rebounding to around the 50 mark. According to the SMM survey, the industry gradually entered the holiday shutdown phase in January, with the production index dropping significantly to 13.52 per cent. Meanwhile, on the raw material side, some large enterprises slightly built up raw material inventories before the holiday to ensure normal operations after the Chinese New Year, based on post-holiday order expectations. This month's raw material procurement index recorded 52.13 per cent, and the inventory index was 73.75 per cent. Additionally, as the Chinese New Year break approached, enterprises faced insufficient new orders, with the new orders index recording 49.37 per cent. The construction aluminium extrusion industry mainly relies on domestic orders, and export orders were affected by export tariff policies, with the export order index falling to 49.37 per cent. Entering February, small and medium-sized plants are expected to gradually resume production after the holiday, and the PMI for construction aluminium extrusion is expected to rebound next month.

Industrial aluminium extrusion ↓In January, the overall PMI for the industrial aluminium extrusion industry recorded 44.53 per cent, pulling back below the 50 mark. By sub-index, the production index recorded 21.11 per cent, mainly due to production cuts during the Chinese New Year break, with enterprises generally producing based on order volumes. According to the SMM survey, order growth in January was limited, with most enterprises relying on existing orders. Although orders for PV-related products declined significantly, enterprises rarely operate a single product line. Thanks to the high demand for automotive extrusion orders, the new orders index rose to 52.98 per cent. Enterprises actively responded to the impact of tariff policies on export products. While export volumes for manufacturers with homogeneous products were hit, high-value-added products saw price agreements with downstream customers, leading to a slight rebound in the new export orders index to 47.66 per cent. Although a few enterprises stockpiled finished products before the holiday to prepare for potential urgent orders from downstream customers, resulting in a finished product inventory index of 50.70 per cent, the sentiment for inventory buildup of finished products and raw materials was not strong, with the raw material inventory index at 66.47 per cent. Overall, downstream orders in the automotive sector remained relatively stable. Some automotive extrusion plants shortened the Chinese New Year break to meet customer demand, resuming production earlier and reaching near full capacity after the holiday. The PMI for the industrial aluminium extrusion industry is expected to rise above the 50 mark in February.

Aluminium Wire and Cable ↓: In January, the composite PMI for the domestic aluminium wire and cable industry recorded 46.1 per cent, operating below the 50 mark due to seasonal factors. Aluminium wire and cable production in January mainly focused on scattered orders, completing some year-end deliveries. However, production was significantly impacted by the suspension of power grid construction and the Chinese New Year break, with the production index recording 17.61 per cent. For new orders, scattered increases were observed in January, but most new orders were scheduled for post-holiday delivery, with the new orders index recording 53.89 per cent, supporting next year's production. On the export side, enterprises reported a pullback in export volumes after concentrated shipments, with the export orders index recording 40.87 per cent. Considering the scattered nature of post-holiday order deliveries, enterprises were not proactive in procurement, maintaining normal inventory levels. The procurement index recorded 43.72 per cent, while the finished product inventory index was 45.92 per cent. As February approaches, aluminium wire and cable enterprises are expected to gradually resume production, with the PMI likely to bottom out and rebound. The PMI for aluminium wire and cable in February 2025 is expected to operate above the 50 mark.

Primary Aluminium Alloy ↑: In January, the PMI for the primary aluminium alloy industry was 47.2 per cent, up 3.0 points M-o-M. January and December are both traditional off-seasons, with many primary aluminium alloy enterprises reporting no significant changes in production and order volumes compared to the previous month. A few enterprises reported a slight decrease in order volumes MoM but did not adjust operating rates, leading to a slight inventory buildup. With the arrival of the Chinese New Year, almost all alloy enterprises anticipated a reduction in order volumes. Some enterprises also indicated plans to slow production during the holiday and lower operating rates. The industry's PMI is expected to drop significantly, far below the 50 mark.

Secondary Aluminium Alloy ↓: In January, the PMI for the secondary aluminium industry dropped sharply by 18.8 points M-o-M to 28.1 per cent, remaining below the 50 mark. Due to the Chinese New Year break, secondary aluminium plants began halting production from January 10, with most shutdowns occurring between January 20 and 26. Production is expected to resume around February 5, with shutdown durations ranging from 5 to 20 days. As a result, the operating rate in the secondary aluminium industry declined significantly in January. Additionally, downstream holiday schedules led to reduced orders. Aluminium scrap traders generally resume work later than secondary aluminium plants, prompting manufacturers to actively procure materials, resulting in a slight increase in raw material inventories. As upstream and downstream enterprises gradually resume operations in February, the industry's PMI is expected to rebound significantly.

As the Chinese New Year break approaches, the end-use market entered the traditional off-season, and aluminium processing enterprises faced year-end shutdowns and production cuts, leading to continued declines in operating rates and order volumes. Although some enterprises maintained stable or slightly increased operating rates to meet urgent pre-holiday deliveries or to make up for production cuts in December due to environmental protection inspections, this could not offset the impact of widespread production cuts and holiday shutdowns.

However, looking ahead to February, after the Chinese New Year break, aluminium processing enterprises are expected to gradually resume production, with the PMI likely to bottom out and rebound above the 50 mark.

Source: SMM

Edited By:


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