Low materials for aluminum alloy market update; UBC at the lower half of JPY140/kg


Having clearly showing a downward trend since mid-May, the prices of low materials used to manufacture aluminum alloy keep dropping.

Both continued price drop of LME aluminum and additional decline in primary aluminum premium put immense pressure on higher grade aluminum scrap, which even led lower grade aluminum scrap with tight supply to drop. Major Japanese aluminum alloy manufacturers announced to lower their purchasing prices by JPY5/kg for higher grade scrap and by JPY3/kg for lower grade scrap in late June.

Offered prices of imported aluminum alloy ingot have also decreased due to lower LME aluminum price and declining purchase from Japan. Chinese ADC12 aluminum alloy ingot is at $1,950-1,970/t (CIF Japan) at the moment. Russian AK5M2 aluminum alloy ingot has dropped more sharply to $1,690/t.





While generation of aluminum scrap is limited in domestic market, demand for aluminum alloy for automobile is not strong. It is said that Q3 is better than Q2, but it’s likely to remain as same as a year earlier. Demand from can manufacturers is extremely low at the moment. At the same time, demand from deoxidizing agent manufacturers is low due to decreased steel production. Demand in sash for building material is also weak. As the statistical data from the Japan Aluminum Association shows clearly, shipment of aluminum for building material has declined for 10 months on end especially in housing and general construction.

In spite of Tokyo Olympics planned to be held, projects has not been in motion. It is because general constructors are picky about their jobs or the government doesn’t take some precautionary countermeasures against labor shortage. Both should be to blame. But, only this fact shows Japan’s actual economy is not good. So, the production of sash hasn’t increased and the demand for A sash scrap has reduced. As the A sash has been unpopular along with the sharp drop in its price, buyers has gained of the market.

According to the research conducted by the Japan Automobile Manufacturers’ Association, Inc. (JAMA), domestic production of automobile has registered year-on-year losses for 10 months on end till April.

As the figures in May and in June are expected to be bad, losses for 12 months on end are likely to unavoidable.

The decrease in automobile production is quite hard for the Japanese aluminum alloy industry which depends on automobile for 80% of their demand. Fortunately, however, strong production of KD (Knock Down) set for completing cars overseas has helped the aluminum alloy industry.

“As the production of parts remains at a high level, demand for aluminum alloy is growing”, an effective from a major aluminum alloy manufacturer said. Some manufacturers plan to produce 1.5 times in Q3 as much as in Q2 to offset loss of production in Q2. The operating rates are certainly rising in aluminum alloy manufacturers.

In that context, some believes that the prices won’t drop as demand for scrap as low materials of aluminum alloy is increasing and supply and demand of scrap for aluminum alloy is tightening. Others are considering the use of higher grade scrap with a relatively ready availability. Also, some manufacturers try to use more UBC which will generate more in coming months. The price of domestic lower grade scrap will drop further if the Russian AK5M2, which is more salvos in the price-cutting war, drops further. Russian AK5M2, which is at $1,700/t (delivery in August) at the moment, is at JPY220/kg CIF Japan.


Aluminum UBC is already at JPY143-145/kg (A press) C&F.

As mentioned above, UBC demand from main users such as RSI manufacturers and deoxidizing agent manufacturers has been extremely low, which directly led UBC price in the biddings implemented by local governments to drop to a JPY140/kg level. As the largest UBC recycler has still continues to limit receiving materials, UBS supply and demand has completely eased off. Although IRUNIVERSE has expected that the price would drop to JPY140/kg in July, JPY130/kg in August and JPY120/kg in September, many participants expect it not to drop to JPY120/kg as UBC may be used as low material of ADC12 aluminum alloy ingot which is in short supply. But, as you know, UBC contains more Mg and Mn which should be controlled in using in ADC12, so the use of UBC is limited thought the alloy manufacturers that have de-Mg equipment can relatively more UBC.

(Edited By O.Sasaki)

↑ Top of Page