On April 25, at the 2024SMM (19th) Aluminum Conference and the First Aluminum Industry Expo - Recycled Aluminum Industry Development Forum hosted by SMM, Zhang Limin, senior analyst of SMM aluminum products, introduced the scrap aluminum industry chain and supply and demand analysis, the current situation of the recycled aluminum alloy market, and the outlook for the recycled aluminum market and price in 2024.
Scrap aluminum industry chain and supply and demand analysis
Supply side - classification of domestic recycled aluminum raw materials
In the past 20 years, China's cumulative aluminum consumption has exceeded 450 million tons, especially since 2009, the domestic real estate, automobile and other industries have developed rapidly, and the domestic aluminum element stock market is large.
At this stage, the recycling of scrap aluminum mainly comes from the recycling of social old materials in an average of about 10-20 years, and its sources involve construction, transportation, electricity, packaging, durable goods and other fields. Among them, recycled materials in the construction and transportation fields are dominant. In recent years, as more and more aluminum scrap has gradually entered the recycling cycle, the production of old materials is also in an explosive growth stage.
The new scrap aluminum mainly comes from electrolytic aluminum and the scraps and defective products generated by the downstream rolling and casting processes, and the materials that appear in the process of use in some terminal industries are also high-quality scrap aluminum. This part of the aluminum scrap is mainly affected by the consumption of electrolytic aluminum in the current year.
Supply side - after the implementation of the new standard, the import of scrap aluminum has increased year by year
In 2018, other aluminum scrap and scrap (760200090) were adjusted to the "Catalogue of Solid Wastes that Can Be Used as Raw Materials in the Restricted Import Category". Since July 1, 2019, the import of aluminum scrap has been completely banned.
In 2020, the raw materials of recycled cast aluminum alloy that meet the standards of "Recycled Casting Aluminum Alloy Raw Materials" (GB/T 38472-2019) are not solid waste and can be imported freely. It will be implemented from November 1, 2020.
From January to November 2023, China's imports of aluminum scrap will continue to implement the 2020 standard, and from December 1, 2023, the new standard "GB/T 38472-2023 Recycled Casting Aluminum Alloy Raw Materials" will be implemented for aluminum scrap imports, with tariff code 76020000.
According to customs data, imports for the whole year of 2023 will be 1.752 million tons, an increase of 16% year-on-year.
On the demand side, the expansion of recycled aluminum processing capacity has driven the growth of demand for aluminum scrap
The downstream demand for domestic aluminum scrap is mainly the production of recycled aluminum alloy, the manufacture of remelting rods for extrusion of aluminum profiles, and the addition of some aluminum scrap in the aluminum strip industry.
By the end of 2023, the domestic recycled aluminum processing capacity will be about 22.46 million tons, and the average annual compound growth rate of the production capacity of recycled aluminum processing enterprises from 2019 to 2023 will be 15% According to SMM data, the actual domestic consumption of recycled aluminum in 2023 will be about 12.15 million tons, with an average annual compound growth rate of 11.3% from 2019 to 2023.
From the perspective of the downstream product structure of aluminum scrap, the growth rate of the output of recycled aluminum alloy ingots has slowed down in recent years, and the growth rate of aluminum scrap consumption has slowed down significantly, while the demand for strip and aluminum extrusion has increased year by year, and the demand growth rate of the entire aluminum scrap industry has continued to drive the follow-up.
According to SMM data, the domestic recycled aluminum alloy industry's consumption of aluminum scrap will account for 61% of the total consumption in 2023, a decrease of 15 percentage points from 2019, while the consumption of aluminum scrap in the aluminum profile section will account for about 23%, an increase of 5 percentage points from 2019.
On the demand side, recycled aluminum alloy is the largest downstream consumer of aluminum scrap and is widely used in the automotive field
►Recycled aluminum alloy is mainly used to produce casting/die-casting aluminum alloy products, and the terminal fields are automobiles, motorcycles, machinery and equipment, communication equipment, etc.
The cast aluminum alloy is mainly the national standard GB/Japanese standard JISH/German standard DIN/American standard ASTM and other standard aluminum alloy ingots, and the most common recycled aluminum product is ADC12 aluminum alloy ingot. It is mainly Al-Si/Al-Si-Cu alloys, and there are also some non-standard aluminum alloy ingots. It can be produced from 100% aluminium scrap and is not limited to the type of aluminium scrap.
►Recycled aluminum rods are mainly 6063 aluminum rods, and there are also a small number of 6061 and 7 series aluminum rods.
The application fields of recycled aluminum rods and aluminum rods have a high degree of overlap, mainly in construction, automobile, electric vehicles and other industries.
►Recycled aluminum strip products are mainly used in packaging, transportation and other fields.
The current situation of the recycled aluminum alloy market
The Anhui plant of the leading recycled aluminum plant has successively increased the amount of recycled deformed alloys, and the new production capacity has once again surpassed that of casting alloys
In 2023, the new domestic recycled aluminum production capacity will total 3.71 million tons, of which about 1.77 million tons will be added to the recycled cast aluminum alloy production capacity, the total completed production capacity will reach 15.04 million tons, and the new recycled deformed aluminum alloy production capacity will be about 1.94 million tons.
From the distribution area of new production capacity, Anhui, Guangxi and Henan provinces are still among the top three provinces in China with new production capacity of recycled aluminum by virtue of the advantages of renewable resource concentration, preferential regional policies and greater development potential of manufacturing industry. Shuai Yichi and other leading enterprises in Anhui factories began to release production capacity at the end of last 22.
From the perspective of the product structure of the new production capacity, the new production capacity of recycled deformed aluminum alloy will once again surpass the casting alloy in 2023 and continue to be in a state of rapid growth. Subsequently, with the gradual improvement of the domestic recycling system and the upgrading of related technologies, the maintenance and utilization of recycled aluminum will be further developed, which will help improve the economic benefits of aluminum scrap and achieve the goal of carbon peaking and carbon neutrality. At the same time, the recycled casting aluminum alloy plant is also actively building new recycled deformed alloy production capacity.
In addition, in order to use hydropower aluminum to achieve the purpose of carbon reduction, as well as actively research and develop high-end aluminum alloy products in the field of new energy vehicles, more and more recycled aluminum enterprises are building factories near Yunnan electrolytic aluminum plant, but this part of aluminum alloy products is mostly primary aluminum alloy or semi-pure aluminum aluminum alloy, and the proportion of recycled aluminum used in the short term is not high, and the proportion will gradually increase in the future.
In the first quarter, the new production capacity of recycled aluminum decreased compared with the same period in 2023, and the overseas layout gradually accelerated
In the first quarter of 2024, the new domestic recycled aluminum production capacity totaled 1.36 million tons, including about 280,000 tons of new recycled cast aluminum alloy production capacity and about 1.08 million tons of new recycled deformed aluminum alloy production capacity, which was a decrease compared with the same period last year.
At the same time, with the deepening of the international layout of new energy vehicles and other industries, in order to broaden overseas resources and enhance global competitiveness, recycled aluminum plants as a material end have also chosen Malaysia, Thailand and other Southeast Asian countries to build factories, and the industrial chain extends upward, in addition to the smelting production line, scrap aluminum sorting, flotation and other raw material pretreatment processes are also perfect.
Automobile production and sales are warming, and the impact of imports is weakening, and the start of recycled aluminum alloy is rising
In 2023, the annual operating rate of recycled aluminum alloy will increase by 2.2 percentage points from the previous year to 45.6%. The impact of the epidemic gradually subsided, and the impact of the reduction in the number of imported aluminum alloy ingots on domestic enterprises weakened, and the annual operating rate was slightly higher than that in 22 years.
More than 70% of recycled cast aluminum alloys are used in automotive parts. In recent years, the demand for traditional recycled cast aluminum alloy has weakened in recent years, while the production and sales of new energy vehicles have increased significantly, and the market share has climbed from 5% in 2020 to 32% in 2023.
In recent years, the import of aluminum alloy ingots from mainland China has become normalized
Before 2020, China's aluminum alloy ingots were mainly net exports, and the import window gradually opened after 2020:
On the one hand, due to the year-by-year restrictions on the import of aluminum scrap in China, the import of aluminum scrap has dropped from 2.13 million tons in 2018 to 850,000 tons in 2020, and the traditional import of aluminum scrap will be completely banned in 2021.
On the other hand, at the beginning of 2020, the epidemic at home and abroad caused aluminum prices to fall sharply, while ADC12 fell behind, and at the same time, the price of overseas aluminum alloy ingots was at a low level.
From the perspective of import source areas, the number of unwrought aluminum alloy ingots imported from Malaysia in 2023 will still be the largest, reaching 476,000 tons, accounting for 42% from 30% in 22 years, and the rest of the top proportions are Vietnam, Thailand and South Korea, all of which are countries with zero negotiated tariffs or specific negotiated tariffs. The remaining countries accounted for 30% of the total.
The internal weakness and external strength superimposed the exchange rate fell, and the import advantage of aluminum alloy ingots weakened
According to customs data, a total of 1.133 million tons of unwrought aluminum alloy ingots will be imported in 2023, a year-on-year decrease of 11.4%. The number of imported aluminum alloy ingots in 2023 is the lowest year since the import window opened in 2020, and the decline in import volume is mainly affected by factors such as poor domestic consumption, inverted prices at home and abroad, and the decline in the exchange rate of RMB against the US dollar.
From January to March 2024, the cumulative import was 193,500 tons, an increase of 8.5% year-on-year. In the same period last year, affected by factors such as the spread of the domestic epidemic, weakening consumption and the relatively early Spring Festival holiday, the monthly import volume in January and February fell to around 80,000 tons, so the year-on-year data this year improved slightly. However, from January to February this year, the import volume decreased compared with the end of 23 months, first, the domestic aluminum price continued to fall after November, but the overseas quotation rose all the way, and the instant profit and loss of imports gradually returned to a loss state; Based on the expectation of rising prices and increasing orders after the holiday, traders signed new orders after January to arrive in Hong Kong, and imported aluminum alloy rebounded to around 100,000 tons in March. However, at present, the forward quotation of ADC12 in Malaysia and other regions has risen to a high of more than 2400 US dollars / ton, and the import loss has intensified.
Silicon prices are falling endlessly, + the spread of refined waste is widening, and the pressure on the cost side of ADC12 has eased slightly
After 2024, silicon prices will continue to fall, and as of April 12, the price of Tongyang 553# has fallen by more than 15% compared with the beginning of the year, driving the cost of a single ton of ADC12 down by 90-165 yuan. Silicon's share of total ADC12 costs continued to decline to 4.1% in Q1.
Due to the seasonal narrowing of scrap aluminum circulation, the Spring Festival holiday of scrap aluminum traders is earlier than that of recycled aluminum plants, and the resumption date is late, resulting in high market prices, narrowing the price spread of refined waste, increasing the pressure on the cost side of recycled aluminum plants, and even production losses. After the holiday, the market circulation gradually recovered, the price spread of refined scrap widened under the sharp rise in aluminum prices, and the pressure on the cost side of ADC12 was partially eased, but due to the increasing resistance to ADC12 price increases, the profit repair was less than expected.
2024 price outlook for the secondary aluminum market
A00 and ADC12 price trend forecast
A00 Price:
In 2024, the increase in the supply side of aluminum will be limited, the domestic production capacity will be close to the "ceiling", and the hydropower supply in the southwest will still intervene in the main production areas of electrolytic aluminum, and the output growth will slow down.
On the demand side, domestic real estate may slow down or decline due to the continuous decline in newly opened area, resulting in a slowdown or decline in the growth rate of subsequent completed areas, and it is difficult for the amount of aluminum used in real estate to rise. The increase in aluminum consumption in the next few years will mainly come from the aluminum consumption of the photovoltaic industry and the new energy vehicle sector, and other traditional aluminum sectors may remain stable. Combined with the forecast of aluminum demand in various sectors, it is expected that the total demand will increase by 3% year-on-year in 2024.
The demand is good and the supply side is approaching the peak, but there are many hydropower disturbances in the southwest, which is prone to the supply increase is less than expected, and the aluminum supply is tight.
Therefore, on the whole, in 2024, the domestic aluminum price may remain strong and volatile, and in the second quarter, when consumption enters the peak season but the supply increment is slow, the market or destocking is obvious, and the aluminum price is boosted.
ADC12 Price:
If the recovery in consumption is less than expected, it will limit the rise of ADC12, but aluminum scrap is expected to maintain a tight balance pattern this year, and the decline of ADC12 is also limited.
Overall, it is expected that the price difference between ADC12 and A00 will narrow to -800~800 yuan/ton in 2024, and the price will show a trend of first high and then low throughout the year.
Aluminum scrap supply and demand balance sheet: the growth rate of domestic scrap supply accelerates The tight supply of aluminum scrap may ease in the future
According to the SMM scrap supply and demand balance data model, the domestic scrap supply has remained tight in recent years, and this year, the country has repeatedly mentioned "industrial upgrading", "increase consumer goods trade-in" and other favorable policies such as vigorously developing the circular economy, the future domestic scrap supply or advance into the rapid growth is expected, and the demand for terminal scrap has slowed down, SMM is expected to ease the domestic scrap supply tension in 2025.
According to the law of the value flow of aluminum scrap, more and more aluminum scrap will be recycled at the primary level. The main reason is that the demand for cooked aluminum alloy has increased significantly, which will widen the price gap between domestic cooked aluminum and raw aluminum.
The tight pattern of aluminum scrap supply and demand strongly supports the price of aluminum scrap, and the cost of aluminum scrap accounts for more than 80% of the cost of recycled aluminum alloy.