Improved demand, fewer supply tighten aluminium scrap market

SHANGHAI, Jul 24 (SMM) – Aluminium scrap supply in China showed signs of tightness in July, showed an SMM survey, which pushed prices higher.

This is expected to offer some support to prices of secondary aluminium.

Improved buying interest among secondary aluminium producers, fewer supplies from domestic scrapyards and fewer inflows of seaborne materials tightened the low-quality aluminium scrap market.

Prices of secondary aluminium are believed to have bottomed out, as demand is already at a low after potential car buyers made their purchases when dealers offered significant discounts to clear inventories in previous months and as a traditional low consumption season in July-August grinds on.

Despite an ongoing low consumption season, aluminium prices are expected to remain rangebound in the short term, supported by growing expectations of Fed interest rate cuts and a consumption recovery after August. This also hampered downside potential in secondary aluminium.

Aside from hopes for a pick-up in secondary aluminium prices, low stocks of raw materials also drove producers to purchase.

Supplies of aluminium scrap, meanwhile, shrank, as high temperature and previous declines in prices of aluminium scrap prompted domestic scrapyards to scale back operations, and as environmental probes hit supplies from Linyi of Shandong.

Smaller inflows of seaborne aluminium scrap also tightened supply, as official approval documents for the latest batch of import quotas have yet to arrive at companies.

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

This and the 9th batch of import quotas, released in late June, totalled 361,186 mt, compared to imported volumes of 349,510 mt registered in the third quarter of 2018.