China Eases Aluminium Scrap Import Restrictions to Address Supply Shortages

Policy Changes to Boost Aluminium Scrap Imports
China’s aluminium scrap imports are set to rise following a significant easing of import restrictions, effective from November 15. The new regulations, announced by the Chinese government on October 23, expand the list of approved imports to include secondary high-purity aluminium and secondary deformed aluminium alloys, alongside the secondary wrought aluminium alloys that were previously allowed since 2020. These regulatory changes reflect China’s strategic move to alleviate its domestic aluminium scrap shortages and improve the efficiency of its resource utilization, especially in the face of growing demand from the aluminium production sector.

Implications of the New Import Standards
The revised policy sets stringent standards for imported scrap, requiring a minimum aluminium content of 91% and a maximum impurity level of 0.8%. This move is expected to encourage smelters to increase their reliance on aluminium scrap feedstock, potentially lowering raw material costs in the long run. While the policy shift has been welcomed by market participants, the ongoing challenge remains the negative import arbitrage that has prevailed since April. High import prices, linked to primary aluminium price negotiations, continue to dampen trader enthusiasm. Nonetheless, the easing of restrictions has reignited interest in the scrap market, with traders beginning to show renewed buying activity despite the existing price pressures.

Rising Domestic Prices and Growing Demand for Scrap
From January to September 2024, China imported 135.2 million tonnes of aluminium scrap, marking a 6.7% year-on-year increase, according to customs data. The uptick in imports comes amid rising domestic alumina prices, driven by tight bauxite supplies and strong demand from aluminium producers. These market conditions underscore the need for cost-effective aluminium scrap, making the relaxation of import restrictions an essential step in stabilizing supply chains and meeting growing demand within China’s aluminium industry.

Market Outlook and Future Dynamics
Although the regulatory changes present a positive outlook for China’s aluminium scrap imports, the overall impact will depend on how global market conditions, such as import pricing and arbitrage conditions, evolve. If these dynamics align favorably, the policy shift could help alleviate China’s supply shortages, stabilize the aluminium market, and foster a more sustainable approach to sourcing raw materials.