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Japanese aluminum consumers eye more scrap usage as prices fall

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Japanese aluminum consumers eye more scrap usage as prices fall

Tokyo — Some Japanese primary aluminum consumers are eyeing an increase in scrap usage while reducing that of primary aluminum, as the price gap widens on the back of falling scrap prices, market sources said Wednesday.

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Japanese extruders and rolling mills re-use scrap generated at their plants, and purchase a mix of scrap and primary aluminum depending on prices.

Secondary aluminum alloy smelters use P1020 primary aluminum for final adjustment of chemical property of products. Their total monthly consumption is 5,000-10,000 mt.

Trade and consumer sources said clean (grade A) 6063 extrusion scrap was trading at Yen 200/kg ($1.96/kg) ex-main port warehouses, while standard P1020 primary aluminum ingot was at Yen 240-250/kg ex-main port warehouses, for 20-100 mt lots.

One consumer said primary aluminum prices are typically Yen 30-40/kg higher than that of 6063 scrap.

The gap is likely to widen as scrap prices are under downward pressure from an increase in domestic supply due to higher imports, the consumer and several traders said.

Japan imported 29,634 mt of aluminum and aluminum alloy scrap in the first half of 2018, up 12.5% year on year, data from the Japan Aluminium Association showed.

The country's scrap exports during the same period fell 1.6% year on year to 80,780 mt.

Japanese scrap imports have increased as China reduced scrap buying internationally since the second quarter of this year because of government restrictions on the import of scrap with higher non-metallic content, sources said.

Exports have stalled in tandem with reduced buying from China, which is the second largest buyer of Japanese scrap after South Korea.

--Mayumi Watanabe, mayumi.watanabe@spglobal.com

--Edited by Irene Tang, irene.tang@spglobal.com