SHANGHAI, Jan 16 (SMM) – Operating rates across Chinese secondary aluminium producers averaged 57.21% in December, up 0.07 percentage point from November but down 9.54 percentage points from December 2017, SMM data showed.
The rates barely changed from November as more export orders and pre-holiday stockpiling offset the impact from weaker domestic demand.
Poor orders from the domestic market in the second half of 2018 drove secondary aluminium producers, with export businesses, to take more export orders, resulting in output increases in December.
Some secondary aluminium producers raised stocks of finished goods in December to prepare for CNY. This kept production stable despite poorer orders.
Greater profits, faster cash recovery and stable supplies of raw material prompted most large Chinese secondary aluminium producers who own export businesses to step up export orders in December. This resulted in a sharp output growth across those firms last month.
China’s secondary aluminium sector is likely to face challenges in 2019, in face of shrinking margins and aluminium scrap supply tightness.
Restrictions on aluminium scrap imports will keep prices of such materials at highs while sluggish consumption of diesel or petrol cars will lower demand for secondary aluminium. High costs and weak prices are set to narrow profit margins of secondary aluminium.
As demand slows, secondary aluminium producers are likely to struggle to seek cheap and stable sources of aluminium scrap.
