China’s A356 aluminum alloy stocks to grow in Jan. on growing output

A356 aluminum alloy stocks in China were expected to grow in January due to growing production and sagging demand, Shanghai Metals Market has learned.

Output at producers surveyed by SMM totaled 115,500 tonnes this month, up 6,000 tonnes from a month ago. Operating rates averaged 70.0%, also an increase of 0.7% month-on-month. Aluminum smelters geared up production of alloy as closure of nearby processors for the Chinese New Year holiday created an overhang of aluminum liquid. This drove A356 aluminum alloy output up.

The upcoming weeklong holiday undermined demand from wheel manufactures. Large wheel manufactures will remain in operation till January 25, but most SMEs began to close on January 20. In addition, poor orders and depressed aluminum prices also deterred wheel makers from appreciable stockpiling.

Most A356 aluminum alloy makers have signed long-term supply contracts for 2014 with wheel manufacturers. Growing demand and tighter supply allowed alloy producers to secure higher processing fees. Large wheel manufacturers were charged 680 yuan ($ 111) per tonne for delivery to factory, while SMEs were charged 700 yuan per tonne, a gain of 30-50 yuan per tonne from a year ago.

A356 aluminum alloy output at the surveyed producers hit 1.29 million tonnes in 2013, up a mere 1.6% from the 1.27 million tonnes recorded for 2012. The uptick in aluminum alloy production was eclipsed by significant growth in wheel production and sales for two reasons. First, a growing number of wheel manufacturers built plants in neighboring regions of aluminum smelters, giving them easier access to aluminum liquid. Second, many wheel makers scaled back alloy purchases as falling aluminum prices made it more cost-effective for them to produce by themselves.