Operating rates across Chinese secondary aluminium producers drop record low in February

According to Shanghai Metals Market, operating rates across Chinese secondary aluminium producers dropped to a record low in February. The Chinese New Year holiday and poor end-market demand were the two main reasons for the decline, as suggested by SMM.

Even in January, China’s secondary aluminium producers operating ratings were down by 2.37 percentage points from December. Its average rate in the said month was at 54.84 per cent, SMM data showed.

The SMM survey had also warned that the operating rates would go further down in February, as large secondary mills were mostly closed for seven days over CNY while medium-sized and small producers were closed for up to 20 days. 

Operation recovery across the secondary aluminium sector in March remained slow so far, as the imminent VAT cuts kept consumers on the sidelines. This resulted in a slower pace of consumption recovery and also hampered production enthusiasm among secondary aluminium producers.

With the impending lower VAT, automakers cut prices to lower inventories and promote sales. Downstream consumption is unlikely to significantly improve in the near term as it will require some time for the new VAT to have an impact.

Nonetheless, SMM expects that operating rates across Chinese secondary aluminium producers will rebound to about 50% in March.