Aluminium scrap supply to remain tight in 2018; prices remain high since the last quarter of 2017

According to an SMM analysis, aluminium scrap supply will be tight in China in 2018, as the domestic aluminium scrap market continues to be plagued by tight supplies since December 2017.

As updated by SMM, average prices for aluminium Zorba scrap stands unchanged at USD 1550 per tonne today. The prices saw last gain in November 2017 from USD 1450 per tonne and since then it remains flat on a higher level. With the supply expected to remain tight, the prices would stay high in the short and medium term. The price trend in last one year can be seen in the following graph. 

Supply has been limited because of the new scrap policies and the restrictions imposed upon the import of aluminium scrap in China. Prerequisites on the level of impurity in imported scrap aluminium are also affecting scrap supply in the domestic market.

Import shortage is further worsened by environmental protection measures taken up by Beijing that have significantly reduced demolition work and also affected scrap remelting operations in many provinces. According to SMM, the review of scrap aluminium invoices intensifies towards the end of the year and the lack of a dedicated invoice system for aluminium scrap further compounds the problem of tight supplies.  

As an alternative to imported scrap, domestic companies are encouraged to use aluminium scrap produced domestically. However, domestic companies are hesitant to depend on domestically sourced material due to sellers' credit and material quality. On the invoice issue, it is unlikely that the issue will be resolved if no policies are introduced by the government.