A restriction upon imported aluminium scrap that is scheduled to go into effect next month is expected to raise production costs for secondary aluminium smelters in the People’s Republic of China, which experts say may close the price gap between Chinese aluminium alloy exports and their less competitive rivals abroad.
As of July 1, Beijing will begin tapering down imports to end with an outright ban of the practice in 2021. The first step is restricting imports to companies with a license from the Ministry of Environment and Ecology, which will place quarterly limits upon import totals.
Though the government has promised to end all aluminium scrap imports, sources at Chinese smelters say their companies are negotiating with Beijing to carve out an exception for high-grade scrap aluminium imports.
In any event, aluminium scrap imports are all but certain to drop significantly from 2017’s total of 2.2 million metric tons and last year’s total of 1.6 million metric tons.
To make up the expected shortfall, the aluminium industry has turned its focus inward by concentrating on building industrial waste dismantling facilities. However, sources in the Chinese market who spoke with S&P Global Platts earlier this week said that such efforts will not come in time to make up the shortfall anytime soon.
Additionally, due to a growing demand for aluminium scrap thanks to Beijing’s push to reach 75 percent utilization of renewable resources by next year, prices are expected to continue to climb.
“Theoretically, [primary] producers should be responsible for recycling costs,” explained Antaike consultant He Xiaohui. “However, waste products in China are a commodity, and recyclers have been the real payer of recycling costs.”
Beijing is expected to permit imports of scrap aluminium with a minimum metal content of 99 percent, while suggesting that P1020 aluminium be substituted for the balance of demand. Both solutions will likely raise feedstock prices by up to 50 percent, per the experts.