Aluminum Scrap Market Struggles in H1 2026; Weak Demand and Policy Challenges Lead to Price Consolidation

 Jul 9, 2026 News:

This week, the overall operating rate of industry leaders in China's aluminum processing sector trended lower, edging down 0.7 percentage point WoW to 61.9%, significantly constrained by off-season effects. The operating rate of primary aluminum alloy edged up 0.2 percentage point to 59.6%, as enterprises focused on long-term contract deliveries, maintaining stable operations overall despite cautious procurement due to price fluctuations. The operating rate of aluminum plate/sheet and strip slipped 0.6 percentage point to 69.4%, weighed on by weak demand for general-use plates and the impact on exports from recovering capacity in North America; although the ESS sector provided support, pressure for production cuts persisted. The operating rate of aluminum wire and cable pulled back significantly by 2.4 percentage points to 66.6%, mainly because the export window closed and orders from State Grid fell short of the same period last year, with domestic demand unable to fill the gap. The operating rate of aluminum extrusion dipped 0.6 percentage point to 53.1%, as a sluggish property market led to shrinking orders for architectural extrusions; despite strong performance from industrial extrusions for ESS, the overall weakness was hard to reverse. The operating rate of aluminum foil edged down 0.4 percentage point to 71.4%, dragged down by a sharp drop in air-conditioning production schedules and the off-season for packaging, with only battery foil remaining stable. The operating rate of secondary aluminum fell 0.4 percentage point to 51.4%, constrained by multiple factors including tight tax invoices, high aluminum scrap costs, and weak end-use demand. Overall, most sectors except ESS were under pressure, and the operating rate is expected to maintain its downtrend in the short term.

Primary Aluminum Alloy: This week, the operating rate of leading primary aluminum alloy enterprises in China recorded 59.6%, a slight rebound of 0.2 percentage point WoW, with an overall stable operational trend. Supply side, industry leaders primarily focused on long-term contract deliveries at this stage, with no significant adjustments observed in production arrangements and no plans for major production schedule changes; the overall operating level generally followed demand for orders on hand. Demand side, aluminum prices consolidated recently, leading to an increase in market quotation frequency, but actual transactions remained cautious. Given that the market currently operates mainly under a point-price model, price fluctuations significantly impacted sentiment among buyers and sellers. Some downstream players and traders, concerned about potential large price swings ahead, maintained a cautious procurement pace and showed limited willingness for active stockpiling. Overall, order deliveries among leading enterprises were relatively stable, and enterprises lacked significant motivation to raise operating rates. In the short term, the operating rate of leading primary aluminum alloy enterprises is expected to move sideways, likely consolidating near 59.6%. Aluminum plate/sheet and strip: This week, the operating rate of industry leaders in the aluminum plate/sheet and strip sector fell 0.6 percentage points WoW to 69.4%. At the enterprise operations level, industry operating pressure continued to mount. Producers faced the dual challenges of insufficient orders and high finished product inventories, leading to an expansion in voluntary production cuts. In terms of order structure, end-use demand for civilian general-purpose plate remained sluggish, with orders for 1xxx and 3xxx series cast-rolled products declining notably. On the export side, after the leading rolling mill in North America resumed production lines in June, its July orders have been fully reclaimed, which will directly affect China's exports to the US. Domestic can stock and automotive sheet producers that had taken on transferred orders have adjusted their production pace accordingly. The ESS sector maintained growth, with national ESS battery cell production reaching 82 GWh in June and expected to rise 4% MoM in July, providing additional order support for related plate/sheet and strip products such as battery casings and brazing materials. As we enter the mid-to-late July period, the probability that an overall demand recovery will drive up operating rates is low. The operating rate of the aluminum plate/sheet and strip industry is expected to continue consolidating on a weak note.

Aluminum wire and cable: This week, the operating rate of China's aluminum wire and cable industry registered 66.6%, down 2.4 percentage points WoW. The operating rate pulled back notably during the week, mainly because the export window for aluminum stranded wire had closed, the backlog of earlier export orders was gradually being fully digested, new order intake was severely insufficient, some enterprises progressively reduced their production loads, and capacity utilization rates dropped significantly. On the domestic front, although the State Grid has been delivering orders successively, top-tier players reported that current orders on hand are smaller in scale than the same period last year, and the increase in new orders is limited, making it difficult to fill the gap left by the ebbing of export orders. Under the dual pressure of fading export dividends and insufficient domestic demand to fill the void, the industry's order structure weakened noticeably, and enterprises' production scheduling enthusiasm declined. Overall, the operating rate of China's aluminum wire and cable industry is expected to remain under pressure and decline further.

Aluminum extrusion: This week, the weekly operating rate of China's aluminum extrusion industry registered 53.1%, down 0.6 percentage points WoW, continuing its downward trend. Breaking it down, building aluminum extrusion remained sluggish this week. Affected by the persistently depressed commercial real estate market, orders from end-user door and window dealers shrank notably. Some downstream door and window dealers chose to downsize their stores or even exit the market, leading to a decline in spot purchases for home improvement doors and windows, thereby dragging down the sector's operating rate. In the industrial aluminum extrusion sector, due to the traditional consumption off-season, some small and medium-sized enterprises reported insufficient follow-on orders, and their production schedules continued to decline during the week. However, recently, demand for industrial aluminum extrusion from the energy storage sector has been impressive, with order growth maintaining a positive trend, partially offsetting the decline in industrial extrusion operating rates. Overall, the weak fundamentals of building aluminum extrusion have not improved, while industrial aluminum extrusion is consolidating on a subdued note due to shrinking orders at small and medium-sized enterprises. The operating rate of the aluminum extrusion industry is expected to maintain its downward trend next week. Aluminum Foil: The operating rate of industry-leading aluminum foil enterprises fell 0.4 ppt WoW to 71.4% this week. At the enterprise operation level, the traditional off-season from July to August deepened further, with operating pressure increasing significantly across the sector. In terms of order structure, the air-conditioner foil segment was the main drag — household air conditioner domestic sales production schedules fell 17% YoY in July, and some air-conditioner aluminum foil producers reported that their production schedules were adjusted down 25–30% MoM. For packaging foil, during the traditional off-season from June to August, orders for packaging foil and pharmaceutical foil showed a clear weakening trend, and producers generally prioritized production control and inventory reduction as their primary strategy. The production pace for battery foil remained stable. Overall, under the triple pressure of deep weakness in air-conditioner foil, the packaging off-season effect, and aluminum price fluctuations, the operating rate of aluminum foil is expected to continue its downward trend in the near term.

Secondary Aluminum: The operating rate of industry-leading secondary aluminum enterprises fell 0.4 ppt WoW to 51.4% this week, as tight tax invoices and the deepening traditional off-season formed a dual constraint, and production cuts and suspensions among enterprises continued. On the raw material side, affected by insufficient tax invoices and tight circulation of compliant aluminum scrap, procurement costs for aluminum scrap remained high, further squeezing enterprise profit margins. Recently, market attention on using primary aluminum to replace scrap in ADC12 production has increased, but from an actual cost calculation perspective, this approach still lacks economic viability overall. Currently, it serves more as a temporary supplementary measure to alleviate invoice shortages rather than a proactive substitution based on cost advantages. Primary aluminum prices strengthened WoW this week, further eroding the already limited substitution economics, and the scale of primary aluminum substitution in the industry did not expand significantly. On the demand side, the traditional off-season characteristics in July continued to manifest, with insufficient new orders downstream and weak restocking willingness from end-users, keeping purchases mainly need-based. After prices rose early in the week, follow-through on high-price transactions was weak; later in the week, some enterprises reported that orders weakened further compared to earlier, with sluggish transactions continuing, and demand providing limited support for operating rates. Overall, against the backdrop of tax invoice issues being difficult to resolve in the short term and the tight supply of compliant aluminum scrap, pressure on raw material supply security for secondary aluminum enterprises remained significant. If end-use demand remains persistently weak, the industry’s operating rate could face further downward potential.