Recycled aluminum raw materials: This week, the aluminum scrap market showed a pattern of weak supply and demand, with prices fluctuating at highs supported by primary aluminum volatility and tight supply. As of August 28, the SMM A00 price closed at 20,730 yuan/mt, up 50 yuan/mt WoW. The supply of aluminum scrap remained tight, especially with shredded aluminum tense scrap becoming even more scarce; although prices dropped 100 yuan/mt on Thursday from an initial range of 17,200-17,700 yuan/mt at the beginning of the week, the overall center moved significantly higher compared to last week. Baled UBC prices were relatively stable, fluctuating rangebound between 15,500-16,100 yuan/mt. Regional disparities were significant, with multiple price hikes in Jiangxi, Hunan, and Hubei regions during the week, while some parts of east China struggled to catch up. Although secondary aluminum enterprises are approaching the traditional peak season, orders only mildly recovered, and high raw material prices suppressed purchase willingness, creating a contrast between active inquiries and actual transactions. It is expected that next week, aluminum scrap prices will hover at highs, with intensified tug-of-war between sellers and buyers. From a macro perspective, the ongoing special cleanup of irregular tax rebates in many areas will have a profound impact on the cost structure of the secondary aluminum industry. During the policy transition period, downstream scrap utilization enterprises may further drive down purchasing prices to offset potential increases in tax costs, intensifying the risk of aluminum scrap price declines. However, the short-term tight supply situation, particularly the scarcity of shredded aluminum tense scrap, will continue to give suppliers bargaining power. SMM predicts that the mainstream range for shredded aluminum (water price) will operate around 17,100-17,600 yuan/mt (excluding tax), while baled UBC prices, supported by rigid demand, will hover around 15,500-16,000 yuan/mt (excluding tax). Overall, the market needs to closely monitor the implementation of policies and the strength of the September peak season consumption recovery, as price trends will depend on the outcome of the tug-of-war between cost transmission and supply shortages.
Secondary aluminum alloy: The cast aluminum alloy futures market held up well this week, with the most-traded contract closing at 20,350 yuan/mt on Thursday. In terms of spot, the ADC12 price rose rapidly, reaching 20,750 yuan/mt as of August 28 according to SMM, an increase of 300 yuan/mt from the previous Friday, and the premium against the most-traded contract expanded to 440 yuan/mt. On the cost side, influenced by the continued tight supply of aluminum scrap both domestically and overseas, raw material prices followed suit, increasing significantly. The cost pressure for secondary aluminum alloy intensified, driving the ADC12 price upward. Additionally, frequent rumors about the cancellation and back payment of tax rebates led to a strong desire among enterprises to pass on costs, resulting in a short-term trend where prices are more likely to rise than fall. Meanwhile, the rapid recovery in the price of finished alloy ingots also improved theoretical profitability in the industry. In terms of demand, as the traditional peak season of September approaches, downstream demand showed a slight recovery, but the actual performance during the peak season remains to be seen. Under the backdrop of rapidly rising prices, market inquiries were active, but actual transactions were moderate. Due to the strengthening of the spot-futures price spread, trading firms engaging in both spot and futures market increased their shipments slightly compared to earlier. In terms of supply, there was a divergence in the operations of secondary aluminum enterprises. Large enterprises maintained high or slightly increased operating rates due to relatively full orders, while production in many areas was still affected by factors such as tight raw material supply, policy adjustments, and environmental protection inspections: Anhui and Jiangxi reduced production out of concern over cost increases due to the potential cancellation of tax rebate policies, while some enterprises in Hebei and Jiangxi cut or halted production due to environmental factors. Regarding inventory, on August 28, the social inventory of secondary aluminum alloy ingots in major domestic consumption areas stood at 37,525 mt, an increase of 2,380 mt from the previous Thursday, maintaining an inventory buildup trend; however, finished product inventories remained at low levels. In terms of imports, overseas ADC12 quotes rose to $2,480–$2,500/mt, but due to the rise in domestic prices and the strengthening of the RMB exchange rate, import losses narrowed to within 200 yuan/mt. Overall, the ADC12 price is expected to continue fluctuating upward in the short term, supported by cost, low inventory, and policy pressures. However, the slow recovery in demand may limit the upside room, and subsequent attention should be paid to the progress of policy implementation, the recovery of aluminum scrap supply, and marginal changes in end-use demand.
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