Operating rate across 50 Chinese aluminum extrusion manufacturers continued to fall in July due to high-temperature weather, labour shortage, and falling orders from the solar sector.
In July, these manufacturers operated at 59.5%, down 2.98 percentage points from June. The construction extrusion sector fell 3.34 percentage points from June to 60.4%. Industrial extrusion manufacturers operated at 50.8%, little changed on the month, our research found.
Operating rate across large-scale manufacturers came in at 65.3%, the rate across medium-sized ones stood at 55.5% and that across small ones up to 26.8%.
Some plants entered summer break amid high temperatures last month, and this dragged down the operating rate. Meanwhile, the number of hours equipment ran during high-temperature weather also declined.
An aluminium extrusion manufacturer with an annual capacity of 400,000 mt told SMM that it met difficulty in hiring skilled workers last month. Shortage of front-line workers directly led to a decline in its operating rate, we learned.
In east China, some small-sized plants that produced extrusion for the solar sector stopped operations in July amid China’s effort to curb solar power capacity growth and the resulting subsidy cuts. For industrial extrusion producers, orders weakened from most downstream sectors, except for rail transport and new-energy vehicles.
However, more export orders, due to depreciating yuan from mid-June, provided some support to the operating rate. China’s export of aluminium strip, rod, and extrusion are likely to stand at 78,000 mt in July, we estimated.
In construction extrusion sector, downstream orders increased year on year as real estate companies accelerated operations to improve their cash flow.
Amid cash flow pressure, raw material inventory at extrusion producers dipped to 13.5%, and inventory of finished products rose to 38% at early August.
We expects the operating rate to fall further to 56% in August due to weakening domestic orders amid traditional slack season.