Henan aluminum supply-chain checks point to improving exports and delayed but not disappearing domestic demand

Overview

This report summarizes Morgan Stanley's field checks and interviews with multiple aluminum processors, traders, aluminum twisted wire producers, and social inventory warehouses in Henan Province. The core conclusion is that export demand and profits are improving, domestic demand is delayed and structurally divergent but not disappearing, leading processors are seeing stronger orders and market share, and the main short-term disturbance comes from liquidity tightening caused by invoice cleanup.

Core views

The report believes aluminum demand is split between strong external demand and uneven domestic demand. Export orders have clearly recovered, with certain products such as aluminum twisted wire performing especially well. On the domestic side, property-related demand is weak and is dragging on some smaller processors, while leading aluminum sheet-and-strip companies still have relatively full order books after expanding capacity, indicating that industry share is concentrating toward the leaders. On the supply side, primary aluminum smelters are constrained in their ability to overproduce by potline stability, accident risk, and real-time energy and emissions supervision, making significant overproduction difficult.

Analysis framework

The research uses on-the-ground industry-chain checks and interviews, covering aluminum processors, traders, aluminum twisted wire producers, and social inventory warehouses in Henan. It focuses on cross-checking export orders, processing fees, inventory turnover, domestic orders, price-sensitive ranges, trading liquidity, and substitution demand.

Methodology notes

• Industry-chain researchField visits and interviews

  Validate changes in demand, orders, profits, and inventory through visits to processors, traders, and warehouses.

  The report's main evidence comes from feedback from multiple local industry-chain participants in Henan rather than from pure financial model extrapolation.

• Supply-demand analysisDemand segmentation and supply constraint analysis

  Separately assess export demand, domestic processing demand, property-related demand, steel substitution, and smelting overproduction constraints.

  This framework helps distinguish real demand changes, short-term trading liquidity disturbances, and structural share shifts.

• Risk reminderRegulatory and trading-liquidity observation

  Invoice cleanup reduced warehouse transaction volumes and affected near-term liquidity.

  The report emphasizes that this factor affects trading and circulation, but it is not equivalent to a decline in end-demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Aluminum supply chain

  Core research focus

  Strengths

  Export orders are improving, processing margins are rising, domestic demand has not disappeared, and supply-side overproduction capacity is constrained.

  Weaknesses

  Domestic demand is delayed, property-related processors have weak orders, and trading liquidity is affected by invoice cleanup.

  Comparison

  Export demand is clearly stronger than property-related domestic demand; leading companies are outperforming smaller processors.

  Risks

  If the export recovery is not sustainable, property demand keeps weakening, or regulatory cleanup continues to suppress liquidity, sector sentiment could come under pressure.

• Leading aluminum processors

  Potential beneficiaries

  Strengths

  Aluminum sheet-and-strip capacity increased by 20%-30%, order books are relatively full, and market share is concentrating toward leading companies.

  Weaknesses

  Still affected by aluminum price volatility, downstream pickup timing, and delayed end-demand.

  Comparison

  Compared with smaller processors, leaders are better positioned to capture orders and gain share.

  Risks

  If high aluminum prices continue to delay purchases downstream or substitution expands, order resilience may weaken.

• Aluminum twisted wire exporters

  Export-cycle beneficiaries

  Strengths

  April export volume rose by about 200% month over month, on-hand export orders are about 20kt, and processing fees are Rmb1,200/ton.

  Weaknesses

  Capacity expansion may be limited by equipment delivery cycles.

  Comparison

  Export performance for aluminum twisted wire is stronger than general domestic building-material demand.

  Risks

  Easing overseas supply tightness, changes in tax rebate policy, or pricing mechanisms could affect orders and profits.

• Property-related aluminum building-material processors

  Weaker-demand segment

  Strengths

  If aluminum prices fall back to about Rmb23,500-24,300/ton, pickup and shipment activity may improve.

  Weaknesses

  Companies with high property exposure saw April orders fall by 20%-30%, and May was only roughly flat.

  Comparison

  Clearly weaker than the export chain and top-tier aluminum sheet-and-strip companies.

  Risks

  Persistent weakness in the property chain, high aluminum prices, and steel substitution could continue to suppress demand.

Key data

• April export order change month over monthabout +30% MoMFrom interviews with leading processors and traders engaged in export business.
• May export orders versus March 2026about +50%Reported by one leading participant.
• April export profit versus 1Q26about +Rmb1,800/tonFrom a processor with 100% of sales locked in under long-term contracts.
• Sales change from advance shipmentsabout +10%Driven by pre-shipment orders caused by tight overseas supply.
• April export volume change for aluminum twisted wireabout +200% MoMFrom a Henan-based aluminum twisted wire producer.
• On-hand export orders for aluminum twisted wireabout 20ktCurrent order position of the interviewed producer.
• Processing fee for aluminum twisted wireRmb1,200/tonExcludes transportation costs.
• Capacity increase at leading aluminum sheet-and-strip producers20%-30%Capacity at a few leading companies increased while orders remained relatively full.
• April order change at a processor with property-related building-material exposuredown 20%-30%This processor has about 80%-90% exposure to building materials, and May was roughly flat month over month.
• Aluminum price range that triggers downstream pickup or shipment increasesabout Rmb23,500-24,300/tonThe price-sensitive range mentioned by most interviewed processors.
• Change in May warehouse transaction volumedown 60% month over monthInvoice cleanup affected transactions in social inventory warehouses and trader liquidity.
• Color-coated aluminum building materials market volume that can be substituted by steelabout 20kt/month, of which about 30% can be substitutedSome color-coated aluminum building materials are being replaced by steel in a high-aluminum-price environment, but the overall volume is small.

Impact & implications

For the aluminum sector, the report sends a mildly positive demand signal: export recovery and tight overseas supply are improving processing margins; domestic demand is delayed by high aluminum prices and the property chain, but leading companies have resilient order books and may benefit from share concentration. Near term, investors should watch for invoice cleanup suppressing trading liquidity, substitution emerging at high prices, and weak orders at smaller factories, while supply-side overproduction constraints should help limit pressure on supply.

Risks

• Invoice cleanup continues to suppress warehouse transactions and trader liquidity.
• Property-related demand remains weaker than expected, weighing on smaller processors' orders.
• Persistently high aluminum prices delay downstream purchases or increase steel substitution.
• Improving export orders may be affected by overseas supply recovery, trade policy changes, or changes in export tax rebate arrangements.
• Capacity expansion in niche segments such as aluminum twisted wire is constrained by equipment delivery cycles.
• The report's OCR text contains some character collisions and recognition errors, and some company names and disclosure items may need to be verified against the original text.

What to watch

• Whether export orders continue to improve month over month after May.
• Whether aluminum processing export profits can sustain the significant improvement versus 1Q26.
• Whether aluminum prices retreat to around Rmb23,500-24,300/ton and drive more downstream pickup.
• How long invoice cleanup continues to affect warehouse transaction volumes and trader behavior.
• Whether order strength and market-share gains at leading aluminum sheet-and-strip companies persist.
• Whether orders for property-related aluminum building materials recover after the April decline.
• Constraints on overproduction from energy and emissions supervision and potline stability at primary aluminum smelters.