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Analysis of primary aluminium replacing aluminium scrap amid nearing CNY
Jan 25,2021 14:35CST
Source:SMM
Back in March-April 2020, a large number of secondary aluminium enterprises used primary aluminium to replace aluminium scrap due to the sharp drop in aluminium prices and the impact of the pandemic on aluminium scrap recycling.

SHANGHAI, Jan 25 (SMM) — Back in March-April 2020, a large number of secondary aluminium enterprises used primary aluminium to replace aluminium scrap due to the sharp drop in aluminium prices and the impact of the pandemic on aluminium scrap recycling. Secondary aluminium companies have shown greater interest in purchasing A00 aluminium recently.

Replacing aluminium scrap with primary aluminium must meet both requirements: 1. Selling price of finished product must be higher than costs for using primary aluminium as raw materials; 2. the price of aluminium scrap is higher than that of primary aluminium. Major users of aluminium scrap are casting aluminium alloy ingot and remelting aluminium billet producers. Take the Guangdong market as an example. Generally speaking, only when processing fees of 6063 aluminium billets and ADC12 aluminium alloy ingots exceed 300 yuan/mt and 1,200 yuan/mt will there be significant profits for using primary aluminium as raw material and producers are willing to replace aluminium scrap with primary aluminium. Secondary aluminium producers reported decent orders recently due to positive automobile consumption. Due to the continuous decline in the price of A00 aluminium, prices of ADC12 secondary aluminium were 1,200 yuan/mt higher than A00 aluminium, meeting one of the requirements for substitution. However, for aluminium billets, processing fees remained lower than costs for using primary aluminium as raw materials.

As the price of aluminium scrap fell much slower than that of A00 aluminium, the price gap between primary aluminium and aluminium scrap has narrowed since December 2020. However, prices of aluminium scrap tense and aluminium scrap taint remained 1,000 yuan/mt and 500 yuan/mt lower than A00 aluminium on a tax-included basis. Despite unfavourable price gap between primary aluminium and aluminium scrap, some companies plan to stockpile A00 aluminium due to aluminium scrap shortages in some regions and optimism over aluminium scrap prices.

Processing fees of 6063 aluminium billets and ADC12 secondary aluminium

Source: SMM

A00 aluminium prices, price gap between primary aluminium and aluminium scrap

Source: SMM

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