China’s secondary aluminium operating rate drops to 33.1% in April’22 for scanty raw materials and production shut

According to the Shanghai metals Market, China’s average operating rate of secondary aluminium recorded a drop of 12.3 percentage points month-on-month to close at 33.1 per cent in April. The resurgence of COVID pandemic was the main reason behind the downfall. The situation deteriorated since March, hitting Shanghai, Jiangsu, and Jilin the hardest, leading to production cuts at a number of local manufacturers. Some large ones had to even halve their production.

Disruption of transportation also caused the downfall of secondary aluminium operating rate. The onset of the fresh wave of COVID put transportation restrictions that hindered the procurement of aluminium scrap, forcing some manufacturers to reduce production for the lack of raw materials. The pandemic also disturbed the import of scrap, resulting in domestic production cuts in Guangdong and Zhejiang.

The continuation of the pandemic in China also hit the downstream demand, especially among car makers and car parts manufacturers, because of which orders for secondary aluminium shrank, and therefore, output dropped.

Many secondary aluminium manufacturers chose to close down production due to narrowed profit for restrained scrap prices despite aluminium price fall, which also led to the fall in operating rates.

In May 2022, operating rates of secondary aluminium are expected to rise as the pandemic situation eases and the transportation efficiency improves, which will lead to production resumption and revived downstream demand.