SHANGHAI, Mar. 28 (SMM) – SMM’s survey found that A356 alloy output at the surveyed producers was 106,500 mt in March, down 7,000 mt from February. Operating rates dropped 3.63% MoM to 55.18%.

SMM believes there is little room for A356 alloy prices to rise in the future, despite falling supply. The Wheel Committee of the China Association of Automotive Manufacturers predicts a growth rate of over 5% for China’s aluminum wheel exports during 2013, as well as an increase of more than 5% in demand for aluminum wheels used in China’s domestic automobiles, and at least 10% growth in demand for replacement wheels. March should have been seasonally high-demand period for alloy consumption, but operating rates at alloy producers actually dropped. This is mainly because alloy producers in Xinjiang’s surrounding areas are unable to produce high-quality alloy due to inferior aluminum liquid from Xinjiang Xinfa Aluminum. Besides, production cuts at Henan-based aluminum smelters also contributed to lower alloy output. 

Alloy producers remained in operations during the Chinese New Year, while wheel factories were on holiday, causing inventories to pile up at alloy producers. These surplus inventories offset output decline, leaving no violent swing in A356 alloy processing fees, which held stable at RMB 600-650/mt.  

A356 alloy supply will continue to fall due to production cuts at aluminum smelters in Zhejiang, Shandong and Henan. On the other hand, as quality of Xinjiang Xinfa Aluminum’s aluminum liquid improves, local alloy capacity will be gradually released. As such, A356 alloy prices are expected to remain stable in the future.