Secondary aluminium market sees tight raw material supply, sluggish demand

SHANGHAI, Apr 23 (SMM) – Following US-Sino trade tension that began in March, the secondary aluminium industry has faced challenges from tight supplies of raw materials and sluggish demand. 

Aluminium scrap prices stayed at high levels due to the lack of specialised invoices in the Chinese domestic market and the country’s restrictions on imports. This has driven the actual invoice tax point to around 12%, 2.5-3% higher from the same period last year. 

In addition, costs of aluminium scrap rose as the maximum impurity content of imported materials was lowered from 2% to 1% from March 1. 

Most secondary aluminium producers in China will cut aluminium scrap imports from the US due the newly-imposed 25% tariff on imports for domestic consumption and other import risks associated with the China-US trade war. They have since actively sourced aluminium scrap from other countries, but supply was tight as the US was a significant supplier.

As a result of the restriction on US aluminium scrap imports, these producers have raised their aluminium alloy ingot exports.

On the demand side, sluggish demand from the automobile industry has weighed on prices of ADC12 aluminium alloy ingots and narrowed the price gap to the A00 aluminium price. The smaller price gap, which is likely to stay before the peak consumption for automobiles in September, meant smaller profits for secondary aluminium producers.

China’s auto production stood at 7.02 million units during the first quarter of this year, down 1.4% year on year, according to data from China Association of Automobile Manufacturers (CAAM).

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