Recycled aluminum enters the era of meager or unprofitable cost control to survive

With the rapid economic development and the urgent need to conserve resources and protect the environment, China’s renewable aluminum industry has developed rapidly in recent years. The output of recycled aluminum has increased from 1.3 million tons in 2002 to 4 million tons in 2010, with an average annual growth rate of More than 20%. Since the financial crisis in 2008, renewable aluminum has entered the era of low profit or no-profit, and how to survive and develop in the era of meager profits challenges all companies.

China's renewable aluminum industry development

Production and scale

China's recycled aluminum industry started late, and it took shape in the late 1970s. However, at the time, the industrial base was weak, and the scale of recycled aluminum was not large. Until the 1980s, driven by the strong demand for aluminum, China's recycled aluminum companies launched a number of small-scale renewable aluminum plants and home-plant companies that have mushroomed. Since the 1990s, foreign capital has entered China's recycled aluminum industry. The quantity of scrap aluminum imports and the export of recycled aluminum products have also been expanding year by year. China's recycled aluminum industry has begun to accelerate its integration with the international recycled aluminum industry.

With the rapid economic development and the urgent need to conserve resources and protect the environment, China's renewable aluminum industry has developed rapidly in recent years. The output of recycled aluminum has increased from 1.3 million tons in 2002 to 3.8 million tons in 2010, with an average annual growth rate of 21.37. The amount of imported aluminum scrap that matches the rapid increase in production of recycled aluminum has increased from 447,700 tons in 2002 to 2,853,500 tons in 2010, with an average annual growth rate of 59.82%. The proportion of scrap aluminum imports in the production of recycled aluminum in the current year increased from 34.38% in 2002 to 75.09% in 2010. The domestic recycling of scrap aluminum increased from 640,000 tons in 2002 to 1.06 million tons (metal) in 2010, an average annual increase of 7.29%.

The new batch of recycled aluminum enterprises have a high starting point for investment, large-scale enterprises, and advanced technology and equipment, and have changed from the traditional family-style production model to the large-scale business model. At present, the annual production capacity of Shanghai Xinge Group Co., the leading company in the industry, has reached 650,000 tons. It is expected that by the end of the “Twelfth Five-Year Plan” period, China's recycled aluminum industry will cultivate a large number of enterprises with advanced technology and equipment, and the output of recycled aluminum will reach 5.8 million tons.

Industry profits and prospects

Since the financial crisis in 2008, renewable aluminum has entered the era of low profit or no profit. Before 1995, the production of recycled aluminum was lucrative, and the average industry profit rate was up to 10%. With the intensification of competition, the current industry average profit is less than 3% or less. How to survive and develop in the era of low profit tests all companies. How to reduce manufacturing costs, procurement costs, and gain competitive advantage are issues that companies must face.

The competitive advantages of aluminum scrap have weakened and the aluminum recycling companies are undergoing tests. China, as the world's largest consumer of aluminum scrap, has high dependence on the international market. With the continuous increase in the price of international primary aluminum, the price of international scrap aluminum has also risen. China's waste aluminum imports are in a dilemma. Under this background, China's primary aluminum enterprises have joined the cast aluminum alloy competition on a large scale, which has adversely affected the recycled aluminum industry. In the market environment that is not yet standardized, there is a phase-out mechanism in the recycled aluminum industry. If the policy is still not adjusted, it may be the advanced enterprises with high investment costs that will first be defeated.

Key points of cost control for recycled aluminum

According to incomplete statistics, waste aluminum raw materials account for about 80% of the cost of recycled aluminum manufacturing, which is the main bottleneck restricting the survival of enterprises. At the same time, waste aluminum raw materials are extremely unstable, and the variety and composition of active ingredients vary greatly. These factors pose serious challenges to the cost control of recycled aluminum. This is also the biggest difference between the production and management of recycled aluminum industry and alumina and electrolytic aluminum industries.

As waste aluminum accounts for up to 80% of the total cost of recycled aluminum manufacturing, in the operation and management of recycled aluminum enterprises, how to reduce the purchase cost of waste aluminum raw materials and ensure adequate quantity of high quality and low cost aluminum scrap raw materials will be a constraint on recycled aluminum enterprises. The most critical factor for the economic operation and long-term development. The variety of waste aluminum raw materials varies greatly and the effective ingredients vary greatly. These factors determine that the production of the recycled aluminum industry can not achieve the scale operation of a single product variety, especially due to the large differences in the metal composition of the various types of waste metal, and slightly during the batching of the entire production organization. Inadvertently, it will cause the production of waste products. Therefore, how to reduce the cash processing cost of recycled aluminum products, in particular, how to solve the problem of ingredients in the production process of recycled aluminum through scientific and effective methods will be the most critical factor restricting the economic operation of recycled aluminum enterprises.

To sum up, the author believes that in the operation and management of the recycled aluminum industry, how to reduce procurement costs and how to solve the scientific ingredients of scrap aluminum materials to reduce the cash processing costs have become two major issues in the management and management of recycled aluminum enterprises.

Recycled aluminum cost control method

In China, after nearly 40 years of development, the reclaimed aluminum industry has been accumulating and summarizing over the years in the two major themes of procurement costs and scientific ingredients, and the most important cost control has been achieved by leading companies such as Shanghai Xinge and Taicang Yiqiu in the industry. The method is:

Eliminating Bottleneck Constraints of Waste Aluminum Resources Guarantee

The establishment of foreign waste metal recycling companies is an inevitable way to solve the problem of raw materials, but also the successful experience of companies in the same industry. In order to establish a reliable aluminum supply channel and effectively prevent procurement risks, most of the domestic aluminum recycling enterprises have set up their own scrap metal trading companies in Europe, the United States, Russia, Hong Kong and other places, directly engaged in the primary market recycling business, and their waste processing. The procedures for monitoring, loading, collection, and customs clearance are all handled by themselves. In addition, within the various domestic reclaimed metal parks, the imported aluminum scrap trading company with a certain scale also set up scrap metal recycling agencies abroad, and has low-cost possession of foreign scrap aluminum resources to obtain profits from it. At present, Shanghai Xinge and Taicang Yiqiu and other enterprises not only guarantee the quantity of imported waste, but also their prices are better than the average market price.

Establish a domestic waste metal recycling station, or form a strategic alliance with “resource holders”, and occupy a domestic waste aluminum recycling market.