In June, the operating rate of secondary aluminum producers saw a narrowing MoM decline and a deep YoY pullback, with attention to production elasticity driven by price spreads [SMM Analysis]

SMM July 7:

June 2026 Survey Data:

According to SMM survey statistics, in June 2026, the secondary aluminum industry operating rate fell 0.9 percentage points MoM from May to 33.3%, and declined 7.6 percentage points YoY.

The industry operating rate continued to decline in June, falling to its lowest level of the year excluding the impact of the Chinese New Year, primarily due to the dual pressures of tight raw material supply and weak end-use demand.

Raw material side, since June, regulatory oversight on “invoice-based economy” has not eased, and coverage has continued to expand. Many regions have suspended reverse invoicing, further worsening the shortage of input invoices. Corporate tax burdens and compliance costs have risen significantly, increasing operational pressure. Meanwhile, late in the month, SHFE aluminum prices accelerated their decline. Although this led to some marginal easing of aluminum scrap prices, scrap prices overall showed resilience, with limited price adjustments. Suppliers’ profit margins were further squeezed, and their willingness to hold back from selling increased. Against the backdrop of both “invoice shortages” and “material shortages,” raw material procurement remained difficult for enterprises, continuing to constrain production release.

Demand side, the traditional consumption off-season became more apparent in June. The automotive industry saw a slowdown in production and sales, weighing on die-casting enterprises’ orders, and secondary aluminum demand remained under pressure. Demand in sectors such as motorcycles was relatively stable. Some export orders saw slight growth benefiting from improved price spreads between Chinese and overseas markets, but the increment was limited. Overall orders continued to contract. Enterprises lacked new production momentum, and operating rates remained under pressure.

However, as the industry had already seen a significant production contraction in May, the scope for further production cuts in June was limited, and as a result, the MoM decline in operating rate narrowed compared with the previous month. On a YoY basis, the decline widened notably , mainly because in the same period last year, with the launch of cast aluminum alloy futures, trading firms engaging in both spot and futures markets actively participated in procurement and restocked aggressively during the off-season, boosting production motivation at secondary aluminum enterprises and creating a high base for the same period.

Looking ahead to July, the industry will continue to face headwinds from the ongoing demand off-season and tighter invoice regulation. However, after two consecutive months of production cuts, the room for further output reduction is already limited. Meanwhile, the price spread between A00 primary aluminum and ADC12 has continued to widen recently, prompting some enterprises to increase primary aluminum purchases to alleviate difficulties in procuring aluminum scrap and tight invoice issues, ensuring normal production. Although the overall scale of using primary aluminum to replace scrap is expected to remain limited, it may help improve raw material supply conditions to some extent, providing marginal support to industry operations. The secondary aluminum industry’s operating rate is therefore likely to see a slight rebound in July.

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Data Description: This survey covers a total capacity of 13.11 million mt.