Aluminum scrap supply to keep tight in Q1 2021

Asian Metal: Mr. Liu, thank you for accepting our interview. Would you please first give us a brief introduction of your company?

Mr. Liu: With a designed annual production capacity of 150,000t of secondary aluminum alloy, our company focuses on production of aluminum alloy ingot, aluminum alloy liquid and secondary aluminum alloy bar, which are mainly used in fields such as automobile, new energy, high-speed rail, power electronics, architecture, aviation, ships and 5G. We choose the domestic advanced high-efficient and energy-saving automatic smelting furnace as the main production equipment which can reduce slagging and improve the purity of aluminum liquid. Our production equipment and technology have reached the advanced level in China.

Asian Metal: The price of cast aluminum scrap continues to rise in the fourth quarter. What do you think are the main reasons for the continuous price rise?

Mr. Liu: First of all, the consumption in the automobile market, communication industry and general machinery industry was low in the first half of 2020 impacted by the COVID-19 pandemic. As the pandemic was brought under control in China, the market demand surged and the peak consumption season that should be in September and October lasted until the end of the year. With the recovery of overseas market, orders from overseas market began to increase in the fourth quarter and became higher than the same period last year, resulting in continued strong demand for secondary aluminum alloy ingot and a substantial increase in the purchase volume of cast aluminum scrap. Secondly, in the fourth quarter, the quota for importing aluminum scrap fell sharply, and the customs clearance of imported aluminum scrap according to the new standard was slow, so the imports of aluminum scrap this year decreased by about 40% from last year. Thirdly, the dismantling volume of aluminum scrap in China kept low in the first half of 2020 due to the COVID-19 pandemic. The consumption of cast aluminum scrap began to increase sharply at the end of the third quarter, while the dismantling volume of the material was still insufficient, leading to a tight supply in the market. Finally, cast aluminum scrap suppliers held back from selling in the fourth quarter as the price of primary aluminum continued to rise.

Asian Metal: The imported aluminum scrap meeting the new standard can be normally cleared by the customs from November 1. Based on the customs clearance situation, do you think the current tight supply can be alleviated?

Mr. Liu: For the moment, the supply of cast aluminum scrap in China will keep tight before the Spring Festival, and the imported aluminum scrap from European and American markets still cannot meet the strict requirements of our new customs standard, so the customs clearance at the port was still slow until the middle of December. In winter, the dismantling volume of aluminum scrap in European and American markets is low, coupled with the current lower output caused by the COVID-19 pandemic, the international supply of aluminum scrap keeps tight. Finally, the international shipping is blocked, and the shipping schedule cannot be guaranteed at present due to lack of containers. Therefore, even if the imported aluminum scrap can be cleared by customs normally, it still cannot alleviate the shortage of cast aluminum scrap supply in China.

Asian Metal: When will the shortage of cast aluminum scrap in China be eased?

Mr. Liu: The situation is likely to last until at least March next year. First, after three months of transition, the customs clearance will be accelerated, which will supplement the cast aluminum scrap supply to a certain extent. Second, with the warming of the weather, the dismantling volume of cast aluminum scrap in China will increase, especially in the north, where the dismantling volume decreases seasonally in winter due to the cold weather.

Asian Metal: Faced with the current tight supply of cast aluminum scrap, how does your company deal with it?

Mr. Liu: In the case of the extreme shortage of cast aluminum scrap at present, we can only follow the market. In addition to making full use of the original purchase channels, we should actively develop new purchase channels. We have increased the purchase volume from traders. Although the price may be high at that time, it is more cost-effective in the long run because the price of cast aluminum scrap continues to rise.

Asian Metal: The secondary aluminum alloy market sees strong demand at present. In your opinion, will the buoyant demand last until the first quarter of 2021?

Mr. Liu: The demand for secondary aluminum alloy ingot indeed keeps strong at present and there is no problem for it to last until the end of the first quarter of next year based on the orders from our downstream customers. A significant portion of our customers are traders, who are also optimistic about the consumer market for secondary aluminum alloy ingot in the first quarter of 2021.

Asian Metal: In view of the fierce competition in domestic secondary aluminum alloy ingot market, what is the future development direction of your company, and do you have any new projects?

Mr. Liu: Faced with the current fierce competition, first of all, we should have strict control over the production process to ensure the quality of products. Secondly, we should strengthen scientific and technological innovation and R&D, and develop more new practical products and broaden our customer base. Thirdly, we should lay a solid foundation for the development of our company, give full play to our competitive advantages and form our own core competitiveness in the industry. As for the new project, we plan to build a secondary aluminum bar production line with a designed annual production capacity of 50,000t. The production line is expected to start construction in the second half of 2021 and be put into commercial operation in 2022, mainly producing architectural and industrial profiles.

Asian Metal: Thanks so much for accepting this interview. We wish your company a thriving business.

Mr. Liu: Thank you very much. We also wish Asian Metal to grow bigger and stronger, and keep providing clients with more and more valuable metal industry information.