SHANGHAI, Oct. 14 (SMM) -- According to the preliminary data from China Customs, China imported 220,000 mt of scrap aluminum during September, up 9.85% MoM. SMM believes higher scrap aluminum imports in September were due mainly to rising SHFE/LME aluminum price ratio and restocking by some secondary aluminum enterprises.

Total imports of scrap aluminum have fallen significantly since the beginning of 2011 due to higher overseas scrap aluminum prices and increasing supply of domestic scrap aluminum. Although scrap aluminum imports in September recovered, but the volume was still down 8.3% on a yearly basis. Total imports in the first nine months of 2011 were only 1.9 million mt, down 11.5% YoY.

SMM sources report that most imported scrap aluminum in September was ordered by enterprises during July and August, and the average SHFE/LME aluminum price ratio was 7.04 from late July to the first 10 days of August, higher than the ratio of 6.7 from late June to the second 10 days of August. The rising SHFE/LME aluminum price ratio helped improve profit margins at domestic scrap aluminum importers, which prompted importers to import scrap aluminum. In addition, the traditional low-demand period for secondary aluminum from June to August has ended, and based on past experience, output at secondary aluminum enterprises in September will be generally higher than that in August, and their demand for scrap aluminum will increase in response. Moreover, the stock-building ahead of China’s National Day holiday also serves as one reason behind rising imports of scrap aluminum in September.

Improved SHFE/LME aluminum price ratio and restocking helped push up China’s imports of scrap aluminum during September. SMM predicts scrap aluminum imports in October will fall significantly given the week-long holiday and stricter regulations concerning scrap aluminum imports.