Higher competition lowers aluminium rod processing fee

SHANGHAI, Jun 4 (SMM) – Processing fees for aluminium rods in Shandong province has fallen since early May to below 300 yuan/mt ex-works as of Friday June 1, as competition grew among aluminium rod processors in Jiangsu province, SMM learned. 

The decline followed after processing fees in Shandong surged to a high of 800 yuan/mt ex-works on May 2 as processors raised fees to offset lower profits from aluminium ingots. 

In Jiangsu, aluminium rod processors resumed operation on high profits of aluminium rods in May. Profits across local processors in Yixing city climbed to over 100 yuan/mt, as processing charges soared.

Before May, aluminium rod processors in Jiangsu suspended production on high costs after the province was required to move from using coal to natural gas for energy. A cheaper way of processing aluminium rod is to use molten aluminium as raw material.

In addition, aluminium rod processors in Henan province had lowered processing fees since the start of May in face of competition from aluminium rod plants in Gansu and Ningxia provinces. Hebei's aluminium rod processors were affected by enterprises in Inner Mongolia, SMM learned. 

As lower processing fees erode the competitiveness of aluminium rod processors in Jiangsu, processing fees are likely to rebound in the short term but are unlikely to exceed 500 yuan/mt, SMM believes. 

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