SMM: Aluminium Scrap Supply to Exceed Demand amid Weak Downstream Consumption

SHANGHAI, Dec 10 (SMM) – SMM believes that the supply of aluminium scrap will turn to surplus, and the import of unwrought aluminium alloy will decline in 2022.

Aluminium scrap industry development

The output of primary aluminium scrap has slowed down due to the production restrictions of aluminium. The old aluminium scrap comes from the past aluminium consumption, and the average recycling cycle is about 15 years. Since the aluminium consumption increased substantially 15 years ago, a large volume of old aluminium scrap starts to enter the recycling period.

China has put many restrictions on the import of aluminium scrap, and the overseas COVID-19 pandemic affected the logistics. China’s import volume of aluminium scrap dropped year by year. Under this impact, China’s net imports of unwrought aluminium alloy turned positive since 2020.

Malaysia will raise the standards for imported aluminium scrap, and the European Union has restricted the import and export of aluminium scrap. However, they have little impact on China’s imports because China only imports a small volume of aluminium scrap from them.

Due to the poor consumption in the real estate and automobile industries this year, the traditional consumption of the secondary aluminium grew more slowly. As such, the aluminium scrap supply will be surplus, which will cause the lower imports of unwrought aluminium alloy in 2022.

Therefore, the secondary aluminium are mainly used to produce the products that are the same as the original products and to produce the wrought aluminium from aluminium scrap taint.

Aluminium scrap price forecast

After aluminium ash is included in the national hazardous waste list, the increase in processing costs will push up the costs of aluminium scrap. At the same time, the high silicon prices will increase the value of high-silicon aluminium alloy scrap. It will make the price spread between the aluminium scrap tense and aluminium positively correlated to the price spread between silicon and aluminium.

If the consumption in real estate and automobile industries remains poor, the aluminium scrap consumption will grow more slowly in 2022, then the price spread will expand between the aluminium and major aluminium scrap such as aluminium extrusion scrap and mechanical tense. However, the prices of 1/8 series aluminium scrap will be less affected, and its average price spread from aluminium will narrow.