Singapore — The Chinese ADC12 aluminum alloy export price extended gains Dec. 15 to hit a 12-year high, amid surging freight costs, a persistent shortage of scrap supply worldwide and robust downstream demand.
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This is the third consecutive week that prices have surged to a new high, with S&P Global Platts' latest assessment at $2,495-2,515/mt Dec. 15. Prices first broke the six-year mark on Dec. 1, followed by a nine-year mark on Dec. 8.
"Last week's [price] increase was crazy," an international producer said, referring to the frantic buying that resulted in export prices jumping $300/mt or 12.4% in a week. This was partly attributed to Japanese traders purchasing prompt cargoes to cover their short positions caused by shipping delays and volatile but rising freight costs.
"[We are] still not willing to process new orders for March," he further added, after being fully booked for January and February shipments. It remains difficult to obtain scrap material when European and North American scrap prices have risen in tandem due to the imbalance in supply-demand fundamentals, with scrap suppliers preferring to sell in their domestic markets, he explained.
This is further compounded by the difficulties of scrap collection during the winter season, market sources said.
Separately, Japanese domestic demand for imported ADC12 material continued to be robust as consumer confidence picked up from April lows, pushing the country's automobile sales volume to recover strongly in the second half of the year -- the sector which accounts for majority of ADC12 usage.
"Demand for ADC12 in Japan is very strong now, [but] supply is very limited. In Japan, we cannot satisfy demand from domestic smelters [alone], and usually, our country purchases about 30,000 mt [of material] from China per month," a Japanese trader said. "But currently, only 6,000 mt is coming from China," he added.
Latest data released by the Japan Automobile Manufacturers Association Dec. 4 showed that total automobile sales reached 411,601 units in November, 1.2% higher month on month and 6.7% higher than the same period a year ago.
"As of now, our company has enough material to cover our customers [and] we are not rushing to purchase material," the Japanese trader said.
Elsewhere, Chinese producers continued to struggle with imports of recycled cast aluminum alloy raw material, even though import quotas are no longer required, as they need to meet specific standards implemented by the Ministry of Ecology and Environment with effect from Nov. 1.
"I heard of scrap imports under the [old] quota-based system, but none under the new regulations]," a Chinese producer in charge of raw material imports said.
The first Japanese trader said: "I heard some smelters imported material successfully into China under the new regulations, [but] a Chinese customs inspector said [they] need much cleaner material." He also said: "We do not know what much cleaner material is."
Meanwhile, the Ministry of Ecology and Environment will be holding a technical specifications meeting in Haikou city over Dec. 21-23, to discuss the implementation of the new "Recycled Cast Aluminum Alloy Raw Materials" standards, to provide further clarity amid the confusion.
"It's difficult to say, but the scrap import situation should improve [following the meeting]," the first Chinese producer said.
The front month Shanghai Futures aluminum contract closed at Yuan 16,435/mt ($2,511/mt) on Dec. 15, Yuan 125/mt ($19/mt) higher week on week. Meanwhile, its counterpart on the London Metal Exchange, the three-month aluminum spot contract, closed at $2,054/mt Dec. 14, $35.5/mt higher week on week.