Weaker auto demand to slow operation of secondary aluminium producers in May

SHANGHAI, May 17 (SMM) – SMM expects the operating rates across secondary aluminium producers in China to extend their declines, to stand at 56% in May, as high inventories across auto producers will slow their purchases of aluminium. 

The upcoming stricter national emission standards, which will take effect on July 1, have depressed sales of cars with lower emission standards, and grow inventory pressure at automakers. 

Lower prices of overseas ADC12 aluminium will bolster imports in May-June, and weigh on the consumption of domestic secondary aluminium alloy ingot. This could also drag on operating rates across secondary aluminium producers in May.

Rates averaged 58.37% in April, down 3.05 percentage points from March but up 0.05 percentage point from April 2018, showed an SMM survey.

Front-loaded orders in late March depleted demand in April, and this accounted for the lower operating rate. Downstream buyers stepped up purchases at the end of March to chase VAT invoices with a rate of 16% before tax cuts took effect. 

Some producers cut production in April as they held back from lowering offers amid sluggish consumption.