Demand for secondary aluminum alloy ingot to decline in Q2 under COVID-19

Asian Metal: Thanks for accepting our interview. Please introduce your company briefly.

Mr. Luo: The Sigma Group, founded in 1978, mainly focuses on trading of secondary aluminum alloy, zinc alloy and scrap metals. It has eight plants (including plants under construction in Binzhou and Gongyi) in China with an annual production capacity of more than 1 million tons. In 1996, the "SIGMA" brand was registered in LME, and Sigma became the first Chinese secondary aluminum alloy producer to trade futures contract on the LME.

Asian Metal: Hit by the COVID-19 pandemic, the secondary aluminum alloy industry witnesses low operating rate. How about your production resumption?

Mr. Luo: Our company has resumed normal production after implementing effective COVID-19 prevention measures required by the emergency management bureau, and can meet customers' demand at present.

Asian Metal: What are the problems for secondary aluminum alloy plants which want to resume production?

Mr. Luo: The epidemic hasn't been fully contained, which continues to disrupt the recycling volume of aluminum scrap, a raw material for secondary aluminum alloy production. As for Sigma, we don't have raw material problem as we have established a complete recycling system. In addition, affected by decreasing auto sales and severe epidemic in foreign countries, export orders decreased and the market shrank on the whole.

Asian Metal: Supply of aluminum scrap has been tight since last Q3. How do you think of the supply in this Q2?

Mr. Luo: The epidemic in China is effectively controlled due to quarantine measures taken by the government and we hope aluminum scrap supply could recover as soon as possible with consumption improving. But the recent price fluctuation of primary aluminum and less quota of imported aluminum scrap add uncertainties to the market outlook of aluminum scrap.

Asian Metal: What's your expectation on the demand from downstream die-casting plants for secondary aluminum alloy ingot in Q2?

Mr. Luo: Demand for secondary aluminum products would increase gradually after the epidemic is brought under control. However, considering the close connection between the material and the auto consumption, which decreased a lot MOM and YOY according to data from CAAM, together with unfavorable export trends, I think the demand for secondary aluminum alloy ingot would drop by more than 30% in Q2.

Asian Metal: Chinese secondary aluminum alloy industry is faced with the impact of imported secondary aluminum alloy ingot. What's your opinion about this?

Mr. Luo: The imported secondary aluminum alloy ingot surely has some impact on domestic secondary aluminum alloy industry, but the quality of the imported material might not as stable as domestic material. In the short term, the severer epidemic situation in foreign countries may lead to a narrower price gap between the imported material and domestic material, making the imported material less competitive in prices. In the long run, the two sources should not be judged on the same level due to different market positioning.

Asian Metal: How do you cope with the impact of the imported secondary aluminum alloy ingot?

Mr. Luo: As a leading company in Chinese secondary aluminum industry, Sigma constantly improves production technique and strictly controls product quality to improve brand image and customer satisfaction. Therefore, the imported material isn't a threat to us.

Asian Metal: We learnt Sigma launched an aluminum plate-strip project in Chongqing last year. Could you please say something about the project and your aim in the future?

Mr. Luo: Sigma promotes resources recycling. Owning the unique aluminum scrap processing and recycling technology, Sigma obtained customers' support and recognition. On the one hand, the project supplements the short capacity of primary aluminum; on the other hand, the recycling work reduces the consumption for natural resource and energy, which is good for environment. Sigma Chongqing cooperated with Southwestern Aluminum last year and Sigma would cooperate with Shandong Weiqiao and Henan Zhongfu this year to develop the project jointly. In the future, Sigma would keep developing relevant businesses based on previous experience and ensure its leading role in the industry.