Secondary aluminium market suffering tight raw material supply and sluggish demand

According to Shanghai Metal Market report on April 23, 2018, the secondary aluminium industry is being hit hard by tight raw material supply and sluggish demand following the US-China trade war started in March 2018.

Aluminium scrap prices have been staying high since then, due to the lack of specialised invoice in the Chinese domestic market and country’s restrictions on imports.  Invoice tax point has also increased to 12 per cent due to this, up 2.5 to 3 per cent compared to the same period last year. The maximum impurity content of imported materials which was lowered from 2 per cent to 1 percent on March 1 has driven the price surge of aluminium scrap, in addition.

The supply is also tight as secondary aluminium producers in China have stopped sourcing aluminium scrap from the US (which used to be the most significant aluminum scrap supplier) for its domestic consumption because of the newly-imposed 25 per cent imported tariff on steel and 10 per cent on aluminium and other import risks associated with US-China trade war. 

As a consequence, China’s aluminium scrap import went down by 5.6 per cent Y-o-Y to close at 180,000 tonnes last month, although up from 119,737 tonnes in February.

On the other hand, due to US aluminium scrap imports restrictions, the producers have raised their aluminium alloy ingot exports.

On the demand side, slow demand from the automobile industry has reduced the ADC12 aluminium alloy ingot price followed by narrower price gap to the A00 aluminium price. This smaller price gap is likely to continue until the peak car consumption season begins in September, which therefore means, lesser profits for secondary aluminium producers till then.

China’s automobile production also went down 1.4 per cent Y-o-Y in Q1 2018 to close at 7.02 million units, according to China Association of Automobile Manufacturers (CAAM).