Aluminium rods processing fees in China drop due to higher competition

According to Shanghai Metal Market update on June 4, 2018, aluminium rods processing fees in Shandong province have witnessed a plunge since early May to below RMB 300 per tonne ex-works as of Friday, June 1. The primary reason for this price drop is the growing competition among aluminium rod processors in Jiangsu province, as SMM learned.

Previously, on May 2, the aluminium rods processing fees in Shandong had surged to as high as RMB 800 per tonne ex-works, owing to the rising fees as decided by the processors to offset lower profits from aluminium ingots.  Subsequently, aluminium rod processors started operating on higher profits in Jiangsu from May, followed which profits across local processors in Yixing city increased to over RMB 100 per tonne.

Before May, aluminium rod processors in Jiangsu had suspended productions on high costs after the province was required to replace natural gas with coal for the energy. However, a cheaper way of processing aluminium rod is using molten aluminium as a raw material.

Henan province had also reduced aluminium rods processing fees since the beginning of May due to higher competition from aluminium rods plants in Gansu and Ningxia provinces.

In Jiangsu, as the processing fees started lowering and eroding the competitiveness of aluminium rod processors, processing fees were likely to rebound in the short term but unlikely to exceed RMB 500 per tonne, SMM believed.