Higher Raw Materials Cost Squeezes China Secondary Al Alloy’ Margin

Higher raw materials cost squeezes Chinese secondary alloyed aluminium makers’ profitability recently. A source in Chinese major alloy maker, Ye Chiu Metal Recycling (China) said the raw materials supply in North America gets tighter due to higher domestic demand and lower supply under bad weather. Chinese offer keeps higher for AD12.1 alloy supported by the higher raw materials cost.

The source in Ye Chiu Metal Recycling (China) said the raw material cost reached US$ 1,950 per tonne for shredder mix metal from US$ 1,900 in early January and US$ 1,800 in late November. A trader source said the price increased by US$ 10-20 while primary aluminium ingot price decreased to less than US$ 2,400 per tonne at London Metal Exchange in 4th week in January.

The extra tight scrap supply in North America lifted the price level due to heavy snow and strong wind while the supply usually decreases in winter season. The tight supply in North America is partly due to speculative inventory building by the dealers when the dealers expect higher price level. The demand recovers when automobile output improves in North America while Chinese and South Korean buyers try to secure the material from North America.

Higher cost for alloys including metallic silicon also impacts on the alloy makers’ profitability. The source in Ye Chiu Metal Recycling (China) said Chinese authority controls power supply and severer environmental regulation reducing metallic silicon refineries. The price is as high as US$ 2,500-2,600 per tonne for 553 metal.

The higher raw materials cost supports Chinese makers’ offer at CIF US$ 2,430-2,440 per tonne by Chinese major to Japan for AD12.1 alloy while smaller Chinese makers’ offer is US$ 2,350-2,380. The price level is expected to keep high due to the raw materials situation.