Research background: After the Qingming Festival this year, the nonferrous metals sector experienced a significant gap and then rebounded to fill the gap. Subsequently, it maintained a range-bound fluctuation and declined in May. Compared with other sector varieties during the same period, the prices of the nonferrous metals sector have shown strong resilience. For Shanghai Aluminum, from the domestic cancellation of export rebate policies at the beginning of the year to the overseas tariff policies this year, as well as the anti-dumping trade protectionist policies of various countries, theoretically, there are many long-term negative factors. However, when it comes to the specific market price, the domestic aluminum price is highly resilient under the support of low inventory. Therefore, we would like to take this opportunity to conduct research and observation on the downstream aluminum processing industry. Observe the industry's profits, operating rates and order inventory situations, in order to have a clearer understanding of the future trend of aluminum prices in Shanghai.
Research period: June 11, 2025 - June 13, 2025
Research location: Hubei
Main conclusion
Overall demand for aluminium materials declined year-on-year, but the extent was limited. From the perspective of orders for the downstream aluminum processing industry this year, the overall order volume is weaker than that of the same period last year, but the extent is limited. The reduction in demand mainly occurs in two aspects: building profiles and exports. The real estate market remains weak, and the number of orders for architectural profiles continues to decline. Exports were mainly affected by trade tariffs and anti-dumping policies, and orders declined significantly year-on-year. The increase in demand is mainly reflected in industrial profiles. Aluminum has been replaced in many aspects, such as copper cables, steel for automotive lightweighting, wood for home decoration, and plastic for packaging and tents, etc. This has greatly increased the demand for aluminum and, on the whole, smooth out the decline in aluminum demand.
2. Aluminum processing enterprises are actively transforming, shifting from architectural profiles to industrial profiles. Constrained by changes in downstream demand, the product structure of the aluminum downstream processing industry is also undergoing active adjustments. More and more enterprises are transforming from traditional architectural profiles to new industrial profiles, and they are also optimistic about the future demand for industrial profiles of aluminum materials.
3. The proportion of molten aluminum in the industry has been increasing year by year. The main raw materials in the processing industry are aluminum rods and scrap aluminum. Through research and visits, it was observed that enterprises' demand for scrap aluminum in raw materials is increasing, while their demand for primary aluminum is declining. Most of them use aluminum rods. Considering the costs of transporting and remelting aluminum ingots, the proportion of molten aluminum in the industry has been increasing year by year. Nowadays, the raw materials of enterprises mainly consist of aluminum rods and scrap aluminum, which will also be the future trend. However, it will also raise concerns about the delivery of aluminum ingots.
4. The aluminum processing industry is experiencing overcapacity and intensified internal competition. Due to the limited entry threshold of the aluminum processing industry, the expansion speed was relatively fast in the early stage. Currently, under the influence of domestic and international macroeconomics and tariff policies, the overall order volume has declined, and overcapacity has emerged in some sub-sectors, leading to intensified internal competition and relatively low processing fees. People from aluminum processing enterprises also indicated that capacity clearance is expected. At present, the focus is on internal management and operation, improving the company's reputation, and stabilizing customer orders.
5. Confusion over aluminum prices and inventory status. During the communication with processing enterprises, there is always confusion about this issue: the overall order volume has declined year-on-year, the industry is gradually entering the off-season, and the operating rate is also declining. However, the inventory of aluminum in Shanghai still remains at a historically low level, and the price is also high. Regarding the low inventory of Shanghai aluminum, we believe that the domestic electrolytic aluminum production capacity is limited, so the impact is limited. The year-on-year increase in primary aluminum imports means that apart from the rise in the proportion of molten aluminum, only the demand side can explain it. From the data, it can be seen that the year-on-year increase in the proportion of molten aluminum this year is limited. Therefore, if we work backward, it also confirms the considerable overall demand for aluminum in Shanghai, and the substitution effect of aluminum material demand is taking effect.
6. There is a risk of a pullback in the medium term, but it is expected that the space will be relatively limited. Given the off-season for demand and the economic risks overseas, we believe that for the Shanghai aluminum price, there is a risk of a decline in the medium term. However, benefiting from the support of low inventory and the actual demand being still acceptable, the expected decline is limited.
Research details
Hubei aluminum processing enterprise A
Basic information of the enterprise: The main business is aluminum processing, with aluminum rods as raw materials. The annual purchase volume is 100,000 tons, mainly from Gansu Province, and the price is locked through traders. The downstream products are architectural profiles and photovoltaic frames. In recent years, it has been undergoing transformation. The proportion of architectural profiles is only about 10%, and it also produces some automotive castings. There are various pricing methods, including weekly average price, monthly average price and point price. The pricing methods for different customers vary. The company also has a waste remelting business. The raw materials come from the company's own scraps and external recycling. Compared with the purchase volume, the proportion is not large. The remelting processing fee is about 1,000 yuan per ton. The current period is gradually entering the off-season, with the operating rate declining to around 50%. The period from June to August each year is considered the off-season for the industry. The regular inventory of aluminum rods is only 2 to 3 days, around 160 to 170 tons. The competition in the processing industry has intensified. The processing fees are relatively low, but the difficulty of making money is increasing, and it is more dependent on relevant policy subsidies.
Hubei Aluminum processing Enterprise B
Basic information of the enterprise: The main business is aluminum processing, with aluminum rods as raw materials. The annual purchase volume is 30,000 tons, and it is available from all over the country. There are many traders, and the average price is mostly adopted for procurement, with less point pricing. The downstream products are architectural profiles (engineering orders) and home decoration profiles. This year, the consumption of home decoration profiles has declined year-on-year. The consumption areas are mainly distributed in Hubei, Hunan, Jiangxi and Henan. The engineering orders are relatively stable with a slight increase, mainly distributed in Hainan and Guangxi. The overall output has not changed much year-on-year, and the order volume is the same as last year. The downstream mostly adopts the fixed-price method. The subsequent development strategy is to stabilize the home decoration end. Develop in a single direction of engineering. The current period is gradually entering the off-season, with the operating rate declining to around 70%. June to August each year is considered the off-season for the industry. The inventory of aluminium rods is around 150 tons, which is at a normal level. The processing fee is around 300 to 400 yuan per ton.
Hubei aluminum processing enterprise C
Basic information of the enterprise: The main business is aluminum processing, which belongs to the rolling sector of deformed aluminum alloys. There are 8 enterprises with an annual output value of over 2 billion yuan, ranking among the top ten in the country in terms of scale. The raw material end includes primary aluminum and scrap aluminum. Primary aluminum accounts for 20% to 30%, and the rest is all scrap aluminum, totaling 120,000 to 130,000 tons. There are remelting equipment, and some aluminum rods are sold externally. The price of scrap aluminum is based on the aluminum price of Changjiang Nonferrous Metals plus a certain premium. The premium fluctuates greatly. The sales area is quite extensive, covering the whole country except for the three northeastern provinces. The downstream price is the aluminum price of Changjiang Nonferrous Metals plus processing fees. Both the purchase and sales are priced on the same day. The risk is that there is a time lag between the purchase of scrap aluminum and the downstream orders. The peak season is after the Spring Festival every year and from November to December, while the off-season is from June to August. Currently, the operating rate is around 60%, and the regular inventory is about 2,000 tons (one of them). The company began to transform towards industrial profiles in 2019. Currently, orders for architectural profiles are not good, while those for industrial profiles are acceptable. The overall order volume has slightly decreased compared to last year. The company is not optimistic about the future of the industry. The entire aluminum processing industry is overcapacity and highly competitive, with relatively low processing fees.
Hubei aluminum processing enterprise D
Basic information of the enterprise: The main business is aluminum processing, including both architectural profiles and industrial profiles. It is gradually shifting towards industrial profiles, with a monthly output of about 3,000 tons and an annual output of 30,000 to 40,000 tons. Most of the raw materials are scrap aluminum, and there is also primary aluminum. The supply of scrap aluminum is tight, and the upstream is reluctant to sell. When the price fluctuates greatly, it is difficult to purchase scrap aluminum. The sales area is quite extensive, covering the entire country. Currently, most of it is still building materials, with a small proportion of exports, mainly to Saudi Arabia. The settlement is made in RMB. The purchase price and the selling price are both determined based on the current day's price, with a certain premium or discount added. Inventory is unstable and changes with orders. Currently, orders are relatively stable, slightly lower than last year, and the operating rate is around 70%. We are rather pessimistic about the overall economy and expect it to last for a long time. The competition within the industry is severe, and we are waiting for the capacity to be cleared.
Hubei aluminum processing enterprise E
Basic situation of the enterprise: The main business is aluminum processing, with orders mainly for architectural profiles. The annual output is about 30,000 tons, showing a significant decline compared to the same period last year. The raw materials include primary aluminium and scrap aluminium, with scrap aluminium being the main type. The domestic production capacity of scrap aluminium is relatively scattered, the supply is tight, and when the price fluctuates greatly, the sale of scrap aluminium is seriously restricted. The order time and the raw material procurement time remain consistent, and the price adopts the average daily price of Shanghai Nonferrous Metals plus the upward discount. The regular inventory lasts for about ten days, which is similar to the production cycle. The customer base is relatively stable, the processing fee is low, and the fixed costs such as molds are relatively high. Currently, the operating rate is around 70%, which has declined compared to the previous period.
