China’s aluminium price rally leads to a dip in secondary aluminium operating rates by 0.25 percentage point in April 2021

In April 2021, operating rates at China's secondary aluminium producers stood at 41.35 per cent, inching down by 0.25 percentage point month-on-month but up by 17.92 percentage points year-on-year. Operating rates at large enterprises increased slightly as furnaces resumed normal operation from maintenance in April.

However, small and mid-sized enterprises saw a dip in their operating rates due to the aluminium price rally of as much as RMB 2,000 per tonne month-on-month in April. Hence, downstream aluminium die-casting enterprises saw pressure in terms of raw material costs, resulting in narrow profit margins and even losses.

In addition, the “core shortage” of automobiles continued to restrict the growth of secondary aluminium orders. On the supply side, the market for circulating scrap aluminium was tight, which led to a decline in output at some secondary aluminium enterprises. The environmental inspection in April also contributed to the downfall in operations at some of the secondary aluminium enterprises in Jiangxi.

In May, more die-casting companies are expected to reduce production as aluminium prices continued to rise. This will have an impact on the orders of secondary aluminium companies. However, the general demand for automobiles, electric tools, and home appliances grew recently. But if aluminium prices rise further and the “core shortage” is not alleviated, the secondary aluminium operating rates will decline.