SHANGHAI, Dec 25 (SMM) – Prices of aluminium scrap across Chinese markets are likely to fall after returning from the Chinese New Year holiday which is in late January, as fresh import quotas are sufficient to ease supply shortages and ensure demand in the first quarter of the new year.
China's environmental authorities on Monday issued the first batch of aluminium scrap import quotas for 2020, providing for new buying and allowing some companies with cargoes left in limbo to claim their shipments to domestic markets.
The China Solid Waste and Chemicals Management Bureau, a unit of the Ministry of Ecology and Environment, granted import allowances for 275,465 mt of high-grade aluminium scrap in the initial batch of quotas for use next year, quadrupled from the cumulative quotas for Q4 2019.
The initial 2020 aluminium scrap import quotas have been awarded to more than 50 companies, eight more than the number of companies who obtained such allowances in 2019.
Aluminium scrap import quotas for Q1 2020 are expected to reach 300,000 mt, Liang Yi, aluminium analyst at SMM said in a note, adding that China imported 332,000 mt of aluminum scrap in Q1 2019.
It is widely expected that aluminium scrap import quotas for the full 2020 will only account for 50% of realised imports in 2019, which means that there would be only about 400,000 mt of allowances for the rest of 2020, and 130,000 mt for each quarter.
Aluminium scrap supply in China could remain tight until the CNY holiday, as companies are unlikely to get approvals for the fresh quotas as soon as 2020 begins.
A large number of aluminium scrap, now left stranded at Hong Kong due to a sharp decline in quotas for Q4, will arrive at the major recycling hub of Guangdong in just a week after the fresh quotas are issued, probably in the middle of January. This means those cargoes will likely arrive at Guangdong during the CNY holiday, and little impact aluminium scrap market before the holiday.
Supply of aluminium scrap usually resumes after the 15th of the first lunar month, which falls on February 8, and trading volume will not recover to normal until late February.
Besides, major aluminium scrap users in Guangdong will begin their CNY break this week, SMM learned.
Prices of aluminum scrap are likely to begin a pull-back in late February, which will spread to prices of ADC12 in end-February to early-March.
