SHANGHAI, May 20 (SMM) – With less than two months to go before some Chinese provinces and cities implement tougher vehicle emission standards, prices of secondary aluminium in China are likely to see more downside as demand will further weaken as the auto market struggles to clear inventories of modals under old emission standards.
The Chinese government will require all light vehicles to adhere to tougher “China VI” emission standards by July 2020 as part of efforts to combat pollution. In face of increasingly heavier environmental pressure, the new standards will go into effect in July 2019 in certain prominent areas such as Beijing, Shenzhen and Shanghai. Automobiles are the major consumer of secondary aluminium alloy.
The secondary aluminium market has already taken a hit from sluggish auto sales. Data from the China Association of Automobile Manufacturers (CAAM) showed that auto sales in China in January-April declined 12.1% from a year ago, 0.8 percentage points larger than the drop in January-March.
Costs for secondary aluminium, meanwhile, hold firm, which will push producers towards or into negative territory. Robust consumption of primary aluminium and higher alumina prices bolstered aluminium prices, and kept prices of aluminium scrap from declining.