SHANGHAI, June 14 (SMM) -  The average operating rate of secondary aluminium alloy producers stood at 45.89% in May, up 1.96 percentage points MoM, but down 13.67 percentage points YoY. With the improvement of the pandemic and the recovery of transportation, most of the secondary aluminium alloy plants in Jiangsu, Zhejiang and Shanghai began to resume their production at the end of April, driving the overall operating rate in the industry to rise in May. The pressure from the backlog of orders and finished product inventories also eased. Due to the slow recovery of end consumption, especially in the automobile industry, the orders of secondary aluminium alloy plants declined to varying degrees in May. High aluminium scrap prices and freight rates, together with falling secondary aluminium alloy prices, eroded the profits of secondary aluminium alloy plants and even left some struggling with losses. As a result, the operating rates in south and south-west China declined.  Entering June, although the impact of the pandemic has gradually subsided, it will take time for the end consumption to recover. It is expected that the operating rates in the secondary aluminium alloy industry will stabilise or decline slightly this month.

According to customs data, China’s imports of unwrought aluminium alloy were 106,000 mt in April, up 19.2% YoY, but down 12.1% MoM. Since mid-February, the SHFE/LME aluminium price ratio has fallen and overseas ADC12 secondary aluminium alloy prices kept rising, which sent aluminium alloy importers into loss-making territory. Traders became less willing to place import orders. The monthly import volume from Malaysia and South Korea decreased to varying degrees due to the pandemic. The arrivals from overseas continued to decline in May. The current prices of imported ADC12 secondary aluminium alloy have dropped to around $2,550/mt, but the import window remains closed, thus the port arrivals from overseas will extend the downward trend.

China exported 25,400 mt of unwrought aluminium alloy in April, an increase of 82.3% year-on-year and 38.5% month-on-month, driven by export profits. It is expected that the export volume will maintain an upward trend in May.

Aluminium prices fell before rising in May and moved between 19,800-21,000 yuan/mt, while secondary aluminium alloy prices extended the decline. As of June 10, large secondary aluminium alloy factories slashed their offers by 900 yuan/mt from a month ago to 20,200-20,500 yuan/mt, while small and medium-sized factories also lowered their quotes by 800 yuan/mt to 19,600-19,800 yuan/mt. Automobile production and sales suffered a heavy blow from the pandemic in April. Although the pandemic situation in Shanghai and other regions improved in May, it still takes time for the automobile supply chain to fully recover. According to SMM survey, orders of die-casting plants decreased by more than 20% in May, thus secondary aluminium alloy plants received very few new orders.

Since the beginning of June, Shanghai has been vigorously promoting the full resumption of production, which will allow the auto industry to recover. On top of that, many regions have introduced policies to stimulate the consumption of cars. Therefore, the secondary aluminium alloy market is expected to improve and its prices may inch higher.   

For queries, please contact Frank LIU at liuxiaolei@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn