Primary aluminum alloy market weak recovery in off-season: when will spring arrive

According to the Shanghai Metals Market survey, the operating rate of China's primary aluminium alloy industry in January was 49.88 per cent, down 5.17 percentage points M-o-M, with a significant decline due to the Chinese New Year holiday. Based on the SMM survey, during the last week before the Chinese New Year, although more than half of the enterprises had no plans to adjust production, it was expected that normal production would continue during the holiday. Some enterprises reported that they were still fully engaged in taking orders and production, with little to no impact on their operating rates. However, some enterprises chose to slow down production, and northern customers indicated that the operating rate in January might drop by 10-20 per cent compared to normal levels. Additionally, some enterprises utilized the holiday period for shutdowns and maintenance, leading to an overall weakening of the operating rate for primary aluminium alloy as the holiday approached. During the Chinese New Year holiday, some enterprises further reduced liquid aluminium output, with expectations for production cuts during the holiday. Leading enterprises in the industry experienced varying degrees of decline in operating rates.
January and February are traditionally the off-season for primary aluminium alloy. Although orders before and after the holiday were less than ideal, enterprises showed a slightly higher willingness to produce primary aluminium alloy compared to aluminium billet, driven by the need to complete liquid aluminium alloying tasks and considerations of profitability, efficiency, supply, and demand. The operating rate of the primary aluminium alloy industry in January was slightly higher than previously expected. According to the SMM survey, as more than half of the enterprises maintained normal production during the holiday, the operating performance in the first week after the holiday showed little difference from the last week before the holiday. Some enterprises even experienced a slight increase in operating rates after the holiday, performing relatively well. However, February as a whole remained an off-season for the primary aluminium alloy sector, with some producers adopting a wait-and-see approach and maintaining a slow production pace. In mid-to-late February, as downstream sectors of primary aluminium alloy resumed operations after the holiday, demand was expected to improve, and the operating rate of primary aluminium alloy might recover to levels close to normal before the holiday. SMM expects the operating rate of China's primary aluminium alloy industry in February to recover to around 53 per cent.