
Shanghai Metals Market data showed operating rates across Chinese secondary aluminium producers averaged 57.21 per cent in December, down 9.54 percentage points year-on-year (YoY). Compared to November, it increased 0.07 percentage point as more export orders and pre-holiday stockpiling offset the impact from weaker domestic demand.

Poor orders from the domestic market in H1 2018 drove secondary aluminium producers, with export businesses, to take more export orders. This resulted in output increase in December. Some secondary aluminium producers raised stocks of finished goods to prepare for CNY. This also kept production stable despite poor orders.
SMM expects secondary aluminium sector in China to face challenges in 2019, in face of shrinking margins and aluminium scrap supply tightness. Restrictions on aluminium scrap imports will keep prices of such materials at highs while sluggish consumption of diesel or petrol cars will lower demand for secondary aluminium. High costs and weak prices are set to narrow profit margins of secondary aluminium.
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