US Al alloy sales to China fizzle out

US secondary aluminum producers have cut back on sales of alloy to China in recent weeks as domestic scrap prices firmed, making Chinese bids less competitive.

While US smelters are still receiving inquiries from Chinese customers, the prices are no longer high enough to compete with the domestic spot market.

US prices for necessary aluminum scrap inputs such as twitch and old cast are up by 4.5¢/lb and 2¢/lb, respectively, while A380.1 alloy prices have only risen by 1.5¢/lb, forcing smelters to push for spot prices not found in the Chinese market.

Obsolete aluminum scrap and zorba prices rose in December, partially because of low flows into yards but also because Chinese and Indian buyers ramped up imports from the US, tightening domestic supply and increasing competition.

"When scrap prices started going up because of increased exports, we were forced to raise prices on the finished goods," a smelter that made sales to China told Argus.

"The Chinese inquiries have not dried up, but we raised our prices on everything we have quoted," said another.

In late 2019, some US secondaries began exporting alloy to China, capitalizing on the country's appetite for aluminum units amid tight scrap import quotas for the fourth quarter. The quotas do not apply to remelt scrap ingot or specification alloy.

"China looked at [imports of alloy from the US] as a risk aversion hedge," said a third US smelter that sold 4mn-5mn lbs of ingot to Chinese customers in 2019.

When third and fourth quarter government-imposed scrap import quotas constrained China's ability to produce alloy for itself, the country's diecasters looked to the Middle East, Europe and Africa, places that historically had not been suppliers.

The search for new sources of aluminum eventually led Chinese buyers to approach US smelters starting in November and December.

By John Betz