SHANGHAI, July 13 (SMM) - According to SMM, the domestic operating rates of billets made from molten aluminium was 72.4%, down 0.23% from May. Although the operating rates in central China increased by 6.25%, the operating rates in north, south-west and north-west China fell intensively. Therefore, the overall operating rates fell slightly. In north China, due to the production suspension for maintenance, the monthly output fell sharply. Many enterprises in Gansu, Qinghai, Sichuan and other places in the north-west and south-west regions reported that terminal consumption was weak in June and the overall orders declined. Therefore, the operating rates declined compared with that in May. At the same time, there was a shortage of molten aluminium in some enterprises in June, hence the operating rates fell. The operating rates in Henan increased because the impact of the pandemic and the supply shortage in May was lifted in June.

Overall, the operating rates of billets made from molten aluminium in June fell month-on-month. Although the impact of the pandemic and the supply shortage and other constraints was lifted, the downstream demand was still weak. Therefore, the overall operating rates in June declined on the month due to the decline in order volume. As many enterprises that produced billets from molten aluminium signed long-term supply contracts with aluminium smelters, the operating rates of the upstream enterprises will not drop significantly despite of the decline in downstream order volume. The social inventory of aluminium billet increased and the conversion margin amid the contradiction between supply and demand. At the same time, due to the sharp drop in aluminium prices, the conversion margin in east China, Nanchang and other places was unlikely to increase. The conversion margin in north regions, such as Inner Mongolia, declined today.

The domestic terminal consumption is expected to worsen amid the traditional off-season, the pandemic and high temperature. The operating rates of billets made from molten aluminium will still decline slightly in July. In addition, the conversion margin will fall rapidly after the aluminium prices shows signs of stabilising.