High-Level Consolidation in Secondary Aluminum[[Weekly Review of Aluminum Scrap and Secondary Aluminum]]

This week, China’s aluminum scrap market continued to fluctuate at highs in a consolidative pattern. Affected by the continued escalation of the US-Iran conflict, primary aluminum fundamentals drove aluminum prices to surge and then stabilize during the week, while the aluminum scrap market also steadied and posted catch-up gains, with price resilience once again standing out. As of April 2, the SMM A00 aluminum price closed at 24,630 yuan/mt, up sharply 1,120 yuan/mt WoW from last Thursday. Shredded aluminum tense scrap (cash price) closed at 21,100 yuan/mt (excl. tax), while baled UBC and similar categories stabilized after posting catch-up gains at the start of the week. In terms of the price difference between primary metal and scrap, as of April 2, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 3,265 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,868 yuan/mt. Supply side, tighter supervision under the reverse invoicing policy remained unchanged, compliance costs in the aluminum scrap recycling segment stayed elevated, and the actual supply of available cargoes with invoices remained tight. Demand side, the traditional peak consumption season of “Golden March and Silver April” fell short of expectations, and downstream scrap utilization enterprises such as secondary alloy producers mostly maintained purchasing as needed and low inventory operations. High prices, coupled with continued wild swings in aluminum prices, kept suppressing procurement enthusiasm among scrap utilization enterprises, leaving overall market transactions sluggish and extending the pattern of underperforming in peak season. The aluminum scrap market is expected to hover at highs and fluctuate upward next week, with the mainstream range for shredded aluminum tense scrap (cash price) likely to run between 20,800-21,300 yuan/mt (excl. tax). Supply side, regulatory policies such as “reverse invoicing” are unlikely to see any substantive easing in the short term, while tight compliant supply, together with continued sentiment to hold back cargoes, will keep providing downside support to prices. Demand side, the recovery in peak season is expected to remain below expectations, with insufficient momentum in end-user order recovery, and the pattern of mainly just-in-time procurement is expected to continue. In the short term, close attention should be paid to the actual impact of Middle East geopolitical conflicts on global aluminum plant capacity, downstream end-user orders, and the implementation progress of the reverse invoicing policy, while staying alert to the risk of sharp fluctuations in aluminum prices at high levels. 

This week, the secondary aluminum alloy market continued to move sideways, with the price center edging up slightly. At the beginning of the week, supported by the rebound in aluminum prices, some enterprises raised quotes due to cost pressure; however, as the aluminum price rally slowed down, willingness to adjust prices weakened markedly, and the market gradually shifted to stable prices with a wait-and-see stance. As of Thursday, the SMM ADC12 price was reported at 24,700 yuan/mt, up 400 yuan/mt WoW from last Thursday. Demand remained weak, with downstream procurement staying cautious and overall market transactions mediocre; some enterprises held cautious or even slightly pessimistic expectations for April orders, wait-and-see sentiment intensified, and demand continued to provide weak support for prices. The market’s main contradiction is currently shifting from raw material cost-driven factors to insufficient consumption momentum. Finished alloy ingot gains lagged significantly behind the raw material side, and industry profit margins narrowed accordingly. In terms of supply, the operating rate of leading enterprises in the secondary aluminum industry was flat WoW at 59.5% this week. This Saturday coincided with the Qingming Festival holiday. Leading enterprises largely maintained normal production, while some small and medium-sized enterprises planned phased production suspensions for the holiday due to insufficient orders, and the overall industry operating rate is expected to drop back slightly. On imports, outside China ADC12 quotes were in the range of $3,320–3,380/mt, while spot import losses remained above 2,000 yuan/mt, leaving the theoretical import window still closed. Looking ahead, cost support is set to weaken, demand recovery is progressing slowly with diverging expectations, and holiday disruptions, together with phased production cuts at some small and medium-sized enterprises, will make it difficult for the market to form clear upward momentum in the short term. ADC12 prices are expected to continue moving sideways within a narrow range. Going forward, close attention should be paid to actual post-holiday consumption performance and the transmission impact of changes in macro sentiment on prices.