Development Pattern and Future Trends of the Recycled Aluminum Industry

1. Industry Development Situation

As a recyclable resource, recycled aluminum significantly reduces energy consumption and emissions of greenhouse gases, solid waste, slag, and wastewater, making it highly beneficial for resource conservation, energy efficiency, and environmental protection. Therefore, the recycled aluminum industry has experienced robust growth globally amid the promotion of circular economy development. China's recycled aluminum industry still holds significant development potential.

Over the past few decades, the global recycled aluminum industry has grown, with the proportion of recycled aluminum production to total aluminum production increasing from 20% in 1950 to around 35% in 2021. In industrialized economies, the proportion of recycled aluminum is generally above 50%. Countries such as the United States, Germany, the United Kingdom, and Italy have achieved high utilization rates of recycled aluminum, while China still lags behind these developed nations.

In 2021, global primary aluminum production reached 67.09 million tons, with recycled aluminum production at 35.83 million tons, accounting for 35% of total aluminum production. Driven by factors such as energy conservation, emission reduction, and limited primary aluminum supply, the recycled aluminum industry is expected to continue its development. The International Aluminum Institute (IAI) predicts that the proportion of recycled aluminum in the global aluminum supply structure will increase to 51% by 2050.

China's recycled aluminum industry started in the 1970s. Despite years of development, primary aluminum still dominates the aluminum supply in China, and the proportion of recycled aluminum remains relatively low compared to other developed countries or regions. According to data from the Ministry of Commerce and the National Bureau of Statistics, in 2021, China's primary aluminum production reached 38.5 million tons, a 3.84% increase compared to the previous year, and recycled aluminum production reached 8 million tons, an 8.11% increase year on year. The proportion of China's recycled aluminum production to its overall aluminum industry in 2021 was only 17.20%, indicating ample room for development in the recycled aluminum industry.

2.Development Pattern and Future Trends of the Recycled Aluminum Industry

With the strong implementation of China's "dual-carbon" industry policy and the continuous global trend of energy conservation and emissions reduction, recycled aluminum faces significant market opportunities. However, international trade disputes and import-export policies have resulted in a structurally imbalanced global market supply, as outlined below:

①Development driven by the concept of green and low-carbon circular economy

The production of primary aluminum is energy-intensive and generates high pollution. According to IAI data, aluminum recycling can reduce energy consumption and greenhouse gas emissions by 95%. Therefore, vigorously developing the recycled aluminum industry can not only alleviate the supply pressure of primary aluminum but also bring important social benefits in terms of resource conservation, energy efficiency, and environmental protection.

In the context of promoting green and low-carbon development globally, the demand for energy conservation and emissions reduction in China's aluminum industry is particularly prominent. According to IAI statistics, in 2019, China's primary aluminum production energy structure was dominated by coal power, accounting for 88%, far higher than the global average level, leading to higher per unit emissions of electrolytic aluminum. In recent years, China's policies have encouraged the development of the circular economy and explicitly called for the acceleration of the recycled non-ferrous metal industry and the promotion of "urban mines" infrastructure construction. The recycled aluminum industry is well-positioned to thrive in line with social development trends. The "14th Five-Year Plan" for the development of the circular economy, released by the National Development and Reform Commission in 2021, sets a target for recycled aluminum production to reach 11.5 million tons by 2025, with an average compound growth rate of 9.22% during 2020-2025. China's government has clarified the industrial policy of "carbon neutrality and peak carbon," further propelling the development of the recycled aluminum industry.

②The trend of automotive lightweighting driving global demand for recycled aluminum

The automotive industry is a major sector for the application of recycled aluminum, accounting for 22% of global recycled aluminum applications in 2019. The future trend of lightweighting in the automotive industry will directly promote the vigorous development of the recycled aluminum industry.

Using lightweight materials in automotive bodies helps improve fuel economy, environmental friendliness, and the performance of vehicles. It is an important trend in the future development of the automotive industry. Since 2015, China has successively issued a series of industrial plans and support policies for automotive lightweighting, advancing the development of the domestic automotive lightweight industry.

Aluminum and aluminum alloys are the primary materials used in automotive parts. According to the "Energy-saving and New Energy Vehicle Technology Roadmap" issued by the Ministry of Industry and Information Technology and the China Society of Automotive Engineers, the target for aluminum usage in lightweighting new materials in vehicle bodies is 190 kg in 2020, 250 kg in 2025, and 350 kg in 2030. The Center for Automotive Research (CAR) in the United States predicts that the proportion of aluminum in the overall construction of vehicles will increase from 7% in 2020 to 15% by 2040. Aluminum and aluminum alloys will have a higher proportion in the overall structure of automobiles, leading to a continuous demand for aluminum materials in the automotive industry. According to a report by CM Business Consulting, titled "Assessment of Aluminium Usage in China's Automobile Industry 2016~2030," China's aluminum consumption in the automotive industry is expected to reach 10.7 million tons by 2030, with recycled aluminum accounting for 4 million tons.

③Changes in the competitive landscape of China's recycled aluminum industry due to trade frictions and waste import controls

Amid significant market opportunities in the Chinese and global markets, the competitive landscape of China's recycled aluminum industry is undergoing new developments:

(1) Market demand drives an increase in competitors' production capacity or capacity expansions.

Recycled aluminum aligns with the objectives of China's national industrial policies. Meanwhile, the development trend of automotive lightweighting activates downstream market demand. To respond to these industry trends, enterprises in the recycled aluminum and related industries are actively expanding and establishing production capacities.

(2) The Stability of Scrap Aluminum Raw Material Supply Becomes the Core Factor Affecting Industry Development

Amid rapid growth in global demand for recycled aluminum, the stability of scrap aluminum raw material supply has become a core factor influencing industry development. As the domestic recycling system for recycled resources is not yet perfect, the supply of domestic scrap aluminum is insufficient. For a long time, importing has been the main way for China's recycled aluminum industry to obtain scrap aluminum raw materials.

From March 23, 2018, the U.S. government imposed a 10% global import tariff on aluminum products. In response to the loss caused by the U.S. tariffs on imported aluminum products, China decided to impose an additional 25% tariff on scrap aluminum imported from the United States, leading to a significant increase in procurement prices for enterprises using imported U.S. scrap aluminum for production. Starting in the second half of 2019, scrap aluminum imports have been subject to approval, with direct controls on the total volume of scrap aluminum imports. Since November 1, 2020, recycled casting aluminum alloy materials that meet the national standard "Recycled Casting Aluminum Alloy Raw Materials" (GB/T38472-2019) are no longer considered solid waste and can be freely imported, while those that do not meet the standard are prohibited from being imported.

Affected by the above factors, the volume of scrap aluminum imports in China has continued to decline significantly. Ensuring a stable supply of raw materials has become a critical issue affecting the core competitiveness of enterprises in the industry in the medium and long term, as well as influencing the future development trend of the recycled aluminum industry. The shortage of scrap aluminum raw materials has restricted domestic effective capacity, leading to an increase in the quantity of imported aluminum alloy ingots in the Chinese market. From 2018 to 2022, China's imports of aluminum alloy ingots increased from 74,500 tons to 1,278,100 tons, with a compound annual growth rate of 103.54%.

To address this supply chain security issue, major industry players generally take the following approaches: 1) Expanding the layout of the scrap aluminum recycling and utilization system, increasing recycling points, and developing the comprehensive recycling (disassembly) industry chain for automobiles. 2) Enhancing international arrangements to increase the utilization of international scrap aluminum raw materials.

However, due to the lack of standardized and unified markets in the domestic scrap aluminum recycling and utilization system, the industry generally faces challenges such as small-scale recycling and poor standardization. The nationwide unified large market for the comprehensive recycling (disassembly) industry chain for automobiles has not yet been formed, making it difficult to establish a standardized and large-scale scrap aluminum recycling and utilization market in the short term.

Therefore, the raw material supply issues caused by these policy factors are difficult to resolve in the short term. For recycled aluminum manufacturers with their main production capacity located within the country, they will continue to face significant supply chain risks in the medium term. Meanwhile, recycled aluminum enterprises with international production bases and import procurement channels will have tremendous development opportunities and are expected to accelerate the acquisition of market share. The recycled aluminum industry will enter a new round of reshuffling and integration, and industry concentration is expected to further increase.