China’s secondary aluminium alloy operating rate grows 2 percentage points in May’22 on improved pandemic

According to the Shanghai Metals Market, the average operating rate of secondary aluminium alloy producers saw a 1.96 percentage points of M-o-M hike to stand at 45.89 per cent in May 2022. But on a yearly basis, the operating rate faced a downfall of 13.67 percentage points.

The monthly increase in secondary aluminium alloy producers operating rates could be attributed to the resumption of production at most of the alloy plants in Jiangsu, Zhejiang, and Shanghai at the end of April and the recovery of transportation with the improvement of the COVID pandemic. The pressure from the backlog of orders and finished product inventories also eased. However, amid this there had been a slow recovery of end-use product consumption, especially in the automobile industry, which resulted in lower orders at some of alloy plants to varying degrees.

In addition, high costs of aluminium scrap along with freight charges, in comparison with falling secondary aluminium alloy prices, eroded the profits of many secondary aluminium alloy plants and lowered their production rates, especially in south and southwest China.

For June, SMM estimates the operating rate to stabilise or fallen slightly given the slow recovery from the pandemic than expected.

SMM data also showed China’s unwrought aluminium alloy imports decreased M-o-M in May by 12.1 per cent but grew Y-o-Y by 19.2 per cent to stand at 106,000 tonnes. The monthly fall was mainly due to the decreased SHFE/LME aluminium price ratio and increased overseas ADC12 secondary alloy prices, which sent importers into loss-making territory. In June, the imports are likely to fall further as the import window remains closed.

On the other hand, China’s exports of unwrought aluminium alloy in May’22 increased 38.5 per cent M-o-M and 82.3 per cent Y-o-Y to 25,400 tonnes, driven by export profits.