SHANGHAI, Feb 25 (SMM) – As March is approaching, the impact of Caishui No. 40 on metal scrap market is increasing day by day. Hua Dong Non-Ferrous Metals City in Linyi, Shandong (hereinafter referred to as Linyi Metals City) saw the throughput volume of aluminium scrap at 19,467.04 mt last week, setting a new high in 2022.

The downstream processing enterprises resumed the production slowly after the Chinese New Year in 2022, and their purchases were inactive affected by the Caishui No.40 as well as the environmental protection policies. Therefore, the traders were less active in restocking. The throughput volume of Linyi Metals City totalled 8,522.34 mt during February 7-13, and reached 19,467.04 mt during February 14-20, and increase of 128.42% on the week.

Causes and impact of the high throughput volume:

The inactive procurement of downstream processing enterprises has resulted in the slow digestion of aluminium scrap in the market. In order to collect funds, the local small sized-suppliers had to lower the prices and sell the goods to the traders in Linyi Metals City. According to the traders in Linyi Metals City, they collected 50-70 mt of aluminium scrap per day since February 18. And they further lowered the prices for shipments. Therefore, the price trends of aluminium and aluminium scrap varied in Linyi.

Impact of value-added tax

A trader in Guizhou plans to reduce the purchasing prices of aluminium scrap by 2.5%-5% and pay the value-added tax.

A trader in Henan stated that it will not bear the value-added tax. In this case, the downstream processing enterprises will pay the tax, and they will force down the purchasing prices to ensure their profits, which will ultimately drag down the aluminium scrap recycling prices.

Therefore, the profits of the upstream suppliers such as small merchants of aluminium scrap will be inevitably squeezed.

How will the aluminium scrap prices change after the implementation of Caishui No. 40?

If the market is stable, the prices will be mainly affected by the supply and demand, and the parties that bear the value-added tax.