China's primary aluminium demand surges by 150,000-200,000 tonnes on weak scrap supply: Antaike

According to Antaike’s report on Wednesday, April 22, China’s primary aluminium demand has surged by an extra 150,000 to 200,000 tonnes over the past one month, owing to aluminium scrap shortage caused by the coronavirus outbreak.

Aluminium scrap supplies have weakened since the end of the Lunar New Year holidays in January. Delay in resuming recycling activity due to the holidays, together with falling imports because of the global COVID19 pandemic, has adversely affected the supplies of scrap, according to the research house.

“Price spread between aluminium scrap and primary aluminium narrowed obviously, leading to increasing amount of primary aluminium as a substitute and driving its demand,” Antaike said in a note.

The most active aluminium contract on the Shanghai Futures Exchange rose to its highest in more than a month at RMB 12,460 per tonne (US$1,759.32/t), as of Monday, April 20.

The research house expects this rise in the demand for primary aluminium as a substitute for scrap to fade as the supply shortage of the latter will ease on the rebound of economic activities.

“The extra consumption of primary aluminium is only a fraction (of total inventories) and not sustainable,” said Antaike, suggesting companies to cut supply to change the weak fundamentals.

China’s increased primary aluminium demand, on the other hand, has led to a fall in primary aluminium ingots inventories across eight major consumption areas. On Monday, April 20, the inventories fell to 1.44 million tonnes, lowest since February 27, learned SMM data.

Aluminium inventories in warehouses tracked by ShFE AL-STX-SGH on Friday decreased to the lowest since March 6 at 485,802 tonnes, according to weekly exchange data.