Narrow downstream demand and soaring aluminium prices lead to weaker secondary aluminium operating rates in China in Feb’21

According to the Shanghai Metals Market, secondary aluminium producers operating rates in China recorded a month-on-month plunge of 20.8 percentage points in February 2021 to stand at 41.35 per cent. However, on a year-on-year calculation, the operating rates increased by 23.23 percentage points, showed the SMM data.

Except for a few large factories that did not stop production during the Chinese New Year holiday, most companies took a break for 6-20 days and conducted maintenance before or after the holiday, resulting in output downfall by one-third or half. Soaring prices of both primary and secondary aluminium after the CNY holiday also consequenced the decline in operating rates, hurting downstream purchases.

Aluminium scrap recyclers, who mostly resumed work in early March, also held back cargoes due to soaring aluminium prices. This resulted in a tight supply of raw material for secondary aluminium producers.

Nonetheless, the production resumption of aluminium scrap recyclers and recovery of downstream demand are expected to bring back the secondary aluminium operating rates to the pre-holiday level in March.

In December 2020, China’s secondary aluminium operating rates stood at 62.65 per cent, up slightly by 0.23 percentage point month-on-month for the second consecutive month. In November, operating rates were at 62.4 per cent, growing by 4.9 percentage points from October.

However, on a year-on-year calculation, December operating rates fell by 3.35 percentage points.