Aluminium Processing Industry PMI Plummets to 40.1% in June 2025

What is the Current State of the Aluminum Processing Industry?

The aluminum processing industry faced a significant downturn in June 2025, with key indicators showing contraction across all segments. The PMI composite index plummeted to 40.1%, falling well below the critical 50% boom-bust line that separates industry expansion from contraction. This represents a substantial decline of 9.7 percentage points month-on-month and 1.5 percentage points year-on-year, signaling broad weakness throughout the sector.

Analysis from Shanghai Metal Market (SMM) reveals that this contraction was widespread, with all subsectors operating below the boom-bust line simultaneously—a concerning development for industry stakeholders. Consequently, there are significant decarbonisation benefits that could help the industry recover over time.

Key Performance Indicators in June 2025

The severity of the June 2025 downturn is best illustrated through the following metrics:

• PMI composite index: 40.1% (significantly below the 50% boom-bust threshold)
• Month-on-month decline: 9.7 percentage points (one of the sharpest monthly drops in recent years)
• Year-on-year decline: 1.5 percentage points (indicating worse performance than the same period last year)
• Production indices: Nearly all segments reported production indices below 30%, showing severe contraction
• New orders indices: Similarly depressed across all segments, with many hovering around 30%

These figures collectively paint a picture of an industry facing substantial headwinds and operational challenges.

Primary Factors Driving the Downturn

The June 2025 contraction can be attributed to several interconnected factors:

1. Seasonal demand weakness: June traditionally marks the beginning of the aluminum processing off-season, but the 2025 seasonal effect appears more pronounced than in previous years.

2. High aluminum prices: Raw aluminum prices approached 21,000 yuan/ton in June, creating significant cost pressures for processors.

3. Price volatility: Beyond just high prices, dramatic fluctuations created market uncertainty, making inventory management and pricing strategies challenging.

4. Weak terminal demand: End-use sectors including construction, automotive, and consumer goods all showed sluggish consumption patterns.

5. Production cuts: In response to sluggish new orders, many manufacturers implemented production cuts to prevent inventory buildup.

"The main reasons were the strong off-season sentiment combined with high and volatile aluminum prices, leading to weak terminal demand and sluggish new orders, prompting many companies to choose production cuts," according to SMM's June 2025 report.

Industry experts note that while seasonal factors play a role every year, the convergence of high raw material costs, weak end-market demand, and persistent inventory pressures has created a particularly challenging environment in 2025. Recent tariff impact analysis suggests these challenges may persist.

How Are Different Aluminum Processing Segments Performing?

The June 2025 downturn has affected various aluminum processing segments differently, with some experiencing more severe contractions than others. A segment-by-segment analysis reveals nuanced challenges across the industry.

Aluminum Sheet/Strip Segment

The aluminum sheet and strip segment showed one of the most significant declines in June 2025:

• PMI: 39.1% (down 10.5 percentage points month-on-month)
• Production index: 29.2% (indicating severe contraction in output)
• New orders index: 29.2% (matching the production decline)
• Finished product inventory index: 60.8% (showing concerning inventory accumulation)
• New export orders index: 42.8% (performing relatively better than domestic orders, but still contracting)

Key Challenges

Sheet and strip manufacturers face multiple market pressures:

• Intensified weakness in domestic demand: Construction sector orders declined month-on-month, with companies reporting slower customer pickups.
• High price deterrence: Downstream customers delayed or reduced purchases due to aluminum prices approaching 21,000 yuan/ton.
• Inventory accumulation: Despite production cuts, finished product inventories remained elevated.
• Limited export relief: While export orders performed slightly better than domestic orders, China-US trade war impact provided minimal support, primarily benefiting only home appliances and kitchen/bathroom sectors.

Industry analysts have expressed concerns about potential price wars due to overcapacity and insufficient domestic demand, which could further compress already thin margins.

Aluminum Foil Segment

The aluminum foil segment, while also contracting, showed slightly better performance than sheet and strip:

• PMI: 45.3% (a modest month-on-month decline, but still below the boom-bust line)
• Production index: 41.2% (indicating contraction, but less severe than other segments)
• New orders index: 41.2% (showing weak but not catastrophic demand)
• Finished product inventory index: 52.8% (indicating mild inventory accumulation)
• New export orders index: 47.3% (close to stability but still contracting)

Key Challenges

Aluminum foil producers face their own set of difficulties:

• Plummeting packaging demand: Foil consumption has been declining steadily since April 2025, with June showing continued weakness.
• Price wars: Intense competition has driven processing fees to extreme lows, with some manufacturers offering rates as low as 5,800 yuan/ton.
• "Price-for-volume" strategies: Companies are sacrificing margins to maintain market share, creating unsustainable business conditions.
• Persistent inventory pressure: Despite aggressive destocking efforts, inventory levels remain elevated.
• Downstream production cuts: End-users have reduced their own production, creating a negative feedback loop that further reduces order volumes.

Market experts note that this segment's slightly better performance is largely due to its diversified end-markets, but the overall trajectory remains concerning.

Construction Profiles Segment

The construction profiles segment, closely tied to China's property market, showed significant weakness:

• PMI: 40.44% (well below the boom-bust line)
• Production index: 29.6% (indicating severe contraction)
• New orders index: 37.69% (showing weak demand)
• Purchasing volume index: 29.15% (reflecting reduced material procurement)
• Raw material inventory index: 34.75% (showing companies are minimizing inventories)

Key Challenges

Construction profile manufacturers face structural and cyclical headwinds:

• Regional production declines: Major manufacturing hubs including Shandong, East China, Hebei, and South China all reported significant output reductions.
• Property market weakness: The ongoing challenges in China's real estate sector continue to suppress demand for construction materials.
• Insufficient new orders: Order volumes are inadequate to maintain normal production levels.
• Backlog depletion: Previously accumulated orders are insufficient to support monthly production targets.
• Processing fee competition: Intense competition in spraying and thermal break processing has further compressed margins.

Industry participants report that companies are widely adopting low raw material inventory strategies to maintain healthier cash flow in this challenging environment. The bauxite project benefits could potentially offset some of these challenges in the long term.

What's Happening in Industrial and Specialized Aluminum Segments?

Beyond the more common aluminum products, specialized segments serving industrial applications are experiencing their own unique market dynamics in June 2025.

Industrial Profiles Segment

The industrial profiles segment, which serves diverse applications from photovoltaics to transportation, showed significant weakness:

• PMI: 37.61% (sharp decline below boom-bust line)
• Production index: 30.33% (severe contraction in output)
• New orders index: 29.0% (very weak demand)
• Purchasing volume index: 21.05% (dramatic reduction in material procurement)
• Raw material inventory index: 28.68% (companies minimizing inventory holdings)

Performance Variations by Application

Industrial profile performance varied significantly based on end-market applications:

• PV frame manufacturers: Companies in East China reported significant output declines and reduced order forecasts, reflecting challenges in the solar energy sector.
• Rail transit, aerospace, and 3C processing: These specialized niches maintained relatively stable customer bases despite broader market weakness.
• Automotive parts: Manufacturers faced intense competition and insufficient backlogged orders, forcing many to reduce production rates.
• Processing companies: Declining fees across all industrial applications have compressed profitability, with many manufacturers struggling to maintain margins.

Market analysts note that these variations highlight the importance of diversification in industrial applications, with companies serving multiple sectors generally faring better than those with concentrated exposure.

Aluminum Cable/Wire Segment

The aluminum cable and wire segment, after four consecutive months above the boom-bust line, fell into contraction in June 2025:

• PMI: 40.2% (falling below 50 after four months of expansion)
• Production index: 37.11% (indicating significant contraction)
• New orders index: 31.42% (showing weak demand)
• Raw material inventory index: 43.0% (companies reducing material stocks)
• Finished goods inventory index: 37.76% (indicating declining finished product inventories)

Market Dynamics

Several factors contributed to this segment's sudden reversal:

• State Grid delivery cycle: The end of first-half concentrated deliveries to State Grid projects created a transitional lull in demand.
• Slow order matching: New project awards have been slow to materialize during this transition period.
• Reduced shipments: Companies reported lower delivery volumes and declining operating rates.
• Bidding patterns: Early June saw concentrated bidding activity followed by a significant slowdown in the latter half of the month.
• Dual inventory reduction: Companies actively reduced both raw material and finished goods inventories to improve cash flow.

Industry experts point out that this segment's performance is heavily influenced by infrastructure investment cycles and government project timelines, making it somewhat less sensitive to general consumer demand patterns. Recent industry evolution trends suggest potential future improvements in this segment.

How Are Aluminum Alloy Markets Performing?

The aluminum alloy sector comprises both primary and recycled alloy segments, each facing distinct market challenges in June 2025.

Primary Alloy Segment

The primary alloy segment experienced one of the most severe contractions:

• PMI: 36.5% (down 5 percentage points month-on-month)
• Production index: 22.9% (yearly low, indicating dramatic output reduction)
• New orders index: 22.9% (yearly low, showing extremely weak demand)
• Product inventory index: 58.8% (elevated inventories despite production cuts)
• Purchasing volume index: 26.5% (significant reduction in raw material procurement)
• New export orders index: 50.0% (at the boom-bust line, performing better than domestic orders)

Triple Market Pressures

Primary alloy producers face a convergence of challenges:

1. Weak seasonal demand: The traditional off-season has severely impacted consumption patterns.
2. Unresolved tariff issues: China-US tariff negotiations have not yielded sufficient relief for primary alloy exporters.
3. High aluminum price feedback: Elevated raw material costs have created negative demand feedback loops throughout the value chain.
4. Production pattern shifts: Companies reported "stable early, falling later" patterns within June, as they initially maintained output before implementing cuts.

Despite these pressures, export orders remained relatively stable at the boom-bust line, providing some support to otherwise weak performance.

Recycled Alloy Segment

The recycled alloy segment showed slightly better performance than primary alloy, but still remained in contraction:

• PMI: 45.0% (slight month-on-month increase but still below boom-bust line)
• Weak terminal demand growth: Limited growth in end-user orders constrained ADC12 price increases.
• Competitive pressure: Low-priced supply intensified margin compression.
• Futures market development: The formal listing of cast aluminum alloy futures on June 10, 2025, boosted trading activity.
• Terminal consumption weakness: Despite the futures market development, sluggish end-user consumption failed to support sustainable price increases.

Market observers note that the slight improvement in this segment's PMI appears technical rather than fundamental, with underlying demand conditions remaining weak.

What Factors Are Influencing Inventory and Production Decisions?

In response to challenging market conditions, aluminum processors have adopted various inventory management and production adjustment strategies to navigate the June 2025 downturn.

Inventory Management Strategies

Different segments have implemented varying approaches to inventory control:

• Sheet/Strip segment: Companies maintained cautious restocking policies (purchasing volume index: 44.5%, raw material inventory index: 46.1%), balancing the need to fulfill existing orders while minimizing excess inventory.

• Construction Profiles: Manufacturers widely adopted low raw material inventory strategies to maintain healthy cash flow in a period of weak demand.

• Industrial Profiles: Companies maintained only safety stocks (raw material inventory index: 28.68%), reflecting extreme caution in procurement.

• Cable/Wire segment: Producers implemented dual inventory reduction, actively decreasing both raw material and finished goods inventories simultaneously.

• Primary Alloy: The segment showed passive inventory accumulation (product inventory index: 58.8%) despite cautious procurement (purchasing volume index: 26.5%), indicating challenges in aligning production with actual demand.

"Companies widely adopted low raw material inventories to maintain healthy cash flow," reported SMM in their June analysis, highlighting the industry's focus on liquidity preservation during this challenging period.

Production Adjustment Patterns

Production strategies showed consistent patterns across segments:

• Widespread cuts: All aluminum processing segments reported significant production reductions in June 2025.

• Temporal patterns: Many companies reported "early-month stability followed by mid-to-late month declines" as they assessed market conditions before implementing cuts.

• Forward planning: Multiple companies announced planned July production cuts, indicating expectations of continued weak demand.

• Operating rate reductions: Insufficient orders forced companies to reduce capacity utilization across all segments.

• Cost-driven adjustments: Some production losses occurred specifically due to high raw material prices, particularly in the recycled aluminum segment where margin compression was most severe.

Industry analysts note that these production adjustments, while necessary for individual company survival, could potentially create supply shortages if demand recovers unexpectedly, leading to price volatility.

What's the Regional Impact Across China's Aluminum Industry?

The June 2025 aluminum processing industry PMI downturn has manifested differently across China's major manufacturing regions, with some areas experiencing more severe contractions than others.

Regional Production Trends

Key manufacturing hubs reported significant output reductions:

• Shandong Province: As a major construction profile manufacturing center, Shandong reported some of the most significant production declines in this segment.

• East China: The region experienced major reductions in construction profiles and PV frame manufacturing, with leading photovoltaic frame producers reporting significant output declines.

• Hebei Province: Notable decreases in construction aluminum output were reported throughout the province, reflecting broader property market weakness.

• South China: Manufacturers across multiple segments reported marked production declines, with particular weakness in consumer-oriented applications.

These regional patterns largely correlate with local industrial specializations, with construction-heavy regions experiencing more severe contractions than areas with more diversified manufacturing bases.

Market Divergence by Region

Different aluminum applications showed varying regional performance:

• PV frame manufacturers: Leading producers in East China reported significant output declines and reduced order forecasts.

• Specialty industrial profiles: Companies serving rail transit, aerospace, and high-tech applications maintained relatively stable operations regardless of region.

• Auto parts companies: Severe competition and declining operating rates affected automotive suppliers across all regions.

• Cable manufacturers: Regional variations appeared largely based on State Grid project timing, with some areas maintaining stronger performance than others.

Industry experts note that these regional variations highlight the importance of both industrial diversification and end-market exposure in determining company performance during challenging market conditions.

What Are the Export Market Conditions?

While domestic demand weakened significantly in June 2025, export markets showed somewhat better performance, though still generally remaining in contraction territory.

Export Performance Indicators

Export orders performed differently across segments:

• Sheet/Strip segment: New export orders index reached 42.8% (higher than the production index of 29.2% but still contracting), providing some offset to extremely weak domestic demand.

• Aluminum foil: New export orders index registered 47.3% (contracting but approaching stability), performing significantly better than domestic orders.

• Primary alloy: New export orders index hit 50.0% (exactly at the boom-bust line), indicating stable export demand despite weak domestic conditions.

These figures suggest that while exports cannot fully compensate for domestic weakness, they are providing some support to otherwise struggling manufacturers.

International Trade Factors

Several factors influenced export performance:

• China-US consultations: Recent trade discussions provided limited benefits, primarily supporting exports in home appliances and kitchen/bathroom sectors.

• Alternative channels: Some primary alloy exporters have developed alternative export routes through Mexico to mitigate direct US tariff impacts.

• US order trends: Despite alternative

Ready to Stay Ahead of the Next Major Mineral Discovery?

Don't miss crucial investment opportunities in the volatile mining sector. Visit Discovery Alert's discoveries page to explore how their proprietary Discovery IQ model provides instant, actionable insights on significant ASX mineral discoveries, giving you a vital market advantage with a 30-day free trial.