Tariff removal under China’s new solid waste law likely to increase secondary aluminium ingots imports: Leo Yi

At Shanghai Metals Market’s 2020 Nonferrous Metals Industry Chain Annual Conference in Suzhou, Leo Yi, senior analyst at SMM, explained the challenges that new solid waste law posed to China’s aluminium scrap supply and operations at secondary aluminium producers.

Yi said the new solid waste law would hike the processing costs of aluminium ash due to insufficiency of qualified processing capacity and greater difficulties in trans-provincial transport of hazardous waste.

“But there are several measures for producers to take to tackle the problem, such as building their own aluminium ash treatment capacity, waiting for the commissioning of new technologies and new processing capacities or reducing production to lower aluminium ash output,” Yi suggested.

Leo Yi also shared insights on profits of imported secondary aluminium under the new solid waste import policy and amid the COVID-19 pandemic. He said the exemption of tariffs on secondary aluminium ingots would increase the import volume.

Among the countries that account for over 1 per cent of Chinese unwrought aluminium alloy imports, Malaysia, Vietnam, Indonesia, Thailand and other ASEAN countries as well as South Korea, with imports of 490,000 tonnes agreed for zero tariffs. The Asia-Pacific Trade Agreement tariff for India stood at 4.6%, with an import volume from India of 57,000 tonnes. Imports from China’s leading aluminium alloy ingots supplying countries like Italy, Russia, Taiwan, Spain, Nigeria, and the United Arab Emirates will increase significantly if import tariffs are exempted.

The import window for aluminium alloy ingots reduced and closed in August 2020, leading in a sharp decline in new import orders. Lower aluminium alloy ingots imports continued during September-November. But if tariffs are cancelled, the window for aluminium alloy ingots will expand, increasing new import order significantly.

“Import opportunity for non-standard aluminium alloy and aluminium scrap increased amid weaker profits of imported ADC12,” Yi said. He added, “Although aluminium scrap import has been freed up, requirements remain strict. At present, most of the overseas aluminium scrap cannot meet the requirements for direct import. Overseas aluminium scrap processing capacity will be insufficient in the short term. Profits are expected to drive imports of non-standard aluminium alloy due to pricing based on discounts and premiums of aluminium, ensuring profits without risk. Overseas aluminium scrap that has not been processed or is of low quality are likely to be imported in the form of non-standard ingots.”