Aluminium scrap prices witnessed a slight downward correction, tracking weak sentiments on a d-o-d basis. Trade participants have been seeing regular price contractions over the last couple of weeks not only in aluminium but in most base metals.
The key factor that could be attributed to the diminishing price trend is the subdued export market. The market has very limited export orders specifically in aluminium alloy ingots ADC12. In overseas markets like China and Japan, the usual export destinations have remained quiet for a significant amount of time and only sporadic deals have been concluded by a few manufacturers in the past month.
SteelMint heard about a few CIF transactions which had been destined for China but these deals could not be confirmed due to sharp price variations among players. And, logically, it is tough closing these deals at such prices since the local realizations are higher in comparison to the export margins at present.
However, these export deals at squeezed margins have been few so far.
Further, the conversion spread from raw material to semi-finished products could have been at near appropriate levels but since the capacity utilisation is not at 100%, the spreads have widened. Units are unable to run at full capacity utilization as regular buying inquiries are slow.
Overall, the operational cost remained high amid lower capacity utilisation along with costly imported aluminium scrap. Containers, which had been booked previously when exchange prices were near $3,000/t levels, are hard to clear currently amid the current market dynamics.
Medium-scale sellers of aluminium alloy ingots even offered some discounts to get immediate liquidity along with maintaining shipments for the near term but were largely unsuccessful in getting bookings because the offers varied widely among manufacturers.
SteelMint assesses aluminium scrap tense prices at INR 154,000-156,000/t exw Delhi and aluminium ingot ADC12 prices are assessed at INR 194,000-196,000/t exw Faridabad, excluding GST.
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