The operating rate of secondary aluminium alloy plants dropped further in January amid raw material shortage and CNY holidays

The operating rate of secondary aluminium alloy industry stood at 55.41% in December, down 3.34 percentage point MoM, but up 14.18 percentage points YoY. The main reasons for the decline include: ① The CNY holiday is approaching, and some companies have shut down furnaces for maintenance around January 20, dragging down the output, while the rest will mostly shut down at the end of January or early February. Most will resume production around February 17 or 24. Large producers will generally take a 4-10 day break, while small and medium-sized ones will be shut down 10-20 days. A few enterprises will halt production for 30 days or more due to raw material shortage or declining orders. Companies who supply molten secondary aluminium alloy to downstream die-casting plants will take a shorter break. Most of them will produce non-stop during the holiday or suspend production for less than a week. Overall, the break time of most factories are little changed compared to last year. ②Raw materials shortage. As CNY approaches, trades in aluminium scrap market dropped significantly as purchasers’ priority shifted to accounts receivables collection before upcoming CNY holiday. Aluminium scrap traders took CNY holidays earlier than secondary aluminium alloy plants, but they will resume production later than Feb 24, thus secondary aluminium alloy companies need to stock up, pushing up aluminium scrap prices. Small and medium-sized plants were shut down early for CNY under cost pressure. ③ Operating rate of secondary aluminium plants fell due to decline in downstream orders or CNY holidays. In February, except for some companies who supply molten secondary aluminium alloy to downstream die-casting plants, most will take CNY holidays, affecting the operating rate.