Covid resurgence impacts on secondary aluminium shipments of Henan province

The resurgence of the Covid pandemic across China has significantly impacted secondary aluminium-producing companies in the Henan province. According to an SMM survey, the pandemic generally affected the production and shipment of secondary aluminium facilities in the local area.

A company in Shangqiu City, Henan, focuses on remelted aluminium billets production with a capacity of 55,000 tonnes per year and a monthly output of 4,500 tonnes. It has maintained average production, but if the pandemic stretches, it may cut output for risk evasion in the following two months at a time when aluminium scrap prices are surging, and aluminium prices are volatile.

In a Yongcheng-Henan-based facility, with a capacity of 110,000 tonnes of ADC12 secondary aluminium per year and a monthly output of 8,500 tonnes, has been in lockdown, but the production was unaffected. Consequently, the restriction on transportation extended the logistic time extremely in addition to a higher freight charge and on that account, the profit margin was squeezed.

While a Changge-Henan-based company focused on remelted aluminium billets production with a capacity of 250,000 tonnes per year and a monthly output of 19,000 tonnes had suffered dramatically from the pandemic restrictions as the company found it difficult to purchase raw materials. The company's in-plant inventory will not be able to support average production if the pandemic continues for another one or two months.

Another company in the province produces remelted aluminium billets using the aluminium liquid, with a production capacity of 28,000 tonnes per year and a monthly output of 1,500 tonnes, and maintained its operating rate at 60-70% when the pandemic broke out. A shortage of aluminium scrap caused the company to lose short-term orders. In spite of the multiple barriers set in its path, it did not intend to reduce production.

Substantially, the pandemic has sprung with a marginal dip in the production of secondary aluminium enterprises in Henan and hampered shipment. Aluminium scrap prices have risen in parallel with aluminium prices, reducing their profit margin significantly. Due to the negative impact of the pandemic, many enterprises were bearish on the recovery of orders from downstream companies. There are a few enterprises that are involved in producing A-grade remelted aluminium billets that are not planning to cut production, as orders are resilient. The consensus is that supply and demand will still balance, despite the industry not replicating the boom last year.