Russian Secondary Al Makers Entering Shutdown with Demand Shrinkage

Russian secondary aluminium alloy makers are suffered from severe demand shrinkage. Their profitability has much worsened due to significant volume down of secondary aluminium alloy export. A director of Daiki Aluminium Industry’s Moscow office indicated there may emerge shutdowns of several Russian alloy makers in 2010 as well as in 2009. Daiki Aluminium Industry is Japanese largest secondary aluminium alloy maker.

Russian production of secondary aluminium alloy totaled approximately 250,000 tonnes through 2009, about 60% of the peak before a global financial crisis. Daiki’s director explained Podolsk Non-ferrous Metals Plant, one of the largest secondary aluminium alloy makers in Russia, is now proceeding in bankruptcy under the governmental control. Podolsk’s output is currently about 1,000 tonnes per month, dropping from 5,000-6,000 tonnes per month at the peak in 2008.

BMC Plant, another large secondary aluminium alloy maker of Russia, became bankrupt in June-July 2009. Russian top 3 makers were previously BMC, Podolsk and Permtsvetmet (PTM) but changed to PTM, MBS and Vtormet. Even at present, middle-class alloy makers are entering plant suspensions in the country.

Recent offer price for Russian secondary aluminium ingot, AK5M2, is C&F $ 1,950 per tonne against Japanese consumers. The offer price rose by $ 100 from the yearend. However, the demand is not active. Russian secondary aluminium makers are still in low operations.

Car makers’ operation rate maintains 40-60% compared with their capacities in Russia. Daiki’s director said Russian government is expected to launch a scrap incentive measure in or after February 2010 to pay 50,000 rubles (about 150,000 yen) to a person who replaces a 10-year-old car with Russian new car.

As to material supply, aluminium scrap generation is significantly decreasing this winter due to slow economy and cold weather.