Tight aluminium scrap supply may bolster secondary aluminium prices: SMM

According to the survey of Shanghai Metals Market, aluminium scrap supply in China showed signs of tightness in July. Improved purchase among secondary aluminium producers, weaker supplies from domestic scrapyards, and fewer inflows of seaborne materials attributed to the tight aluminium scrap market.

This is, however, expected to offer some support to prices of secondary aluminium. The secondary aluminium prices were otherwise, believed to have reached the lowest level with the decrease in car manufacture as a result of sluggish demand. Potential car buyers made their purchases when dealers offered significant discounts to clear inventories in previous months. Moreover, July-August is traditionally a low consumption season for aluminium scrap.

Aside from igniting hopes for a pick-up in secondary aluminium prices, low stocks of scrap drove producers to purchase, which further led to a tight supply in the market. Production cut at domestic scrapyards as a result of a poor profit margin on low scrap prices was also a reason for the shrink in supplies.

Official approval documents for the latest batch of import quotas are yet to arrive at companies. This has resulted in smaller inflows of seaborne aluminium scrap and therefore, the tight supply.

China’s top environmental watchdog issued the latest batch of metal scrap import quotas earlier this month, allowing 306,930 tonnes of aluminium scrap to enter China.