Cost Support Battles Weak Demand; Short-Term ADC12 Prices Move Sideways [Aluminum Scrap and Secondary Aluminum Weekly Review]

Aluminum Scrap:

This week, the aluminum scrap market stayed high while moving sideways, with overall limited price fluctuations. On July 23, SMM A00 spot aluminum prices closed at 23,260 yuan/mt, up slightly by 90 yuan/mt WoW. Regarding the price spread between primary aluminum and scrap, on July 23, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was approximately 2,100 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap in Foshan was approximately 780 yuan/mt, both remaining at historical lows. In terms of imports, according to customs data, China's aluminum scrap imports in June 2026 totaled approximately 132,800 mt, down MoM from 152,000 mt in May, marking the third consecutive monthly decline. From the cumulative data for 2026, total aluminum scrap imports from January to June were approximately 981,800 mt. Orders from Southeast Asia in the Guangdong region increased, and the import window improved slightly, but new transactions still primarily involved low-priced resources, with overall spot market trading activity remaining limited. Affected by the UAE's aluminum scrap export ban and the EU's tariff hike policy, the shrinkage effect on high-quality aluminum scrap import sources will further manifest in the future. Next week, the aluminum scrap market is expected to continue a narrow sideways pattern, suppressed by demand and supported by costs. Against the backdrop of deepening off-season, downstream end-user orders are unlikely to see substantial improvement, and scrap utilization enterprises continue to purchase as needed, with the purchasing atmosphere unlikely to improve significantly. The mainstream operating range for shredded aluminum tense scrap (priced based on aluminum content) is expected to be at 19,800-20,400 yuan/mt. Currently, the price spread between primary aluminum and scrap has narrowed to a historical low, significantly weakening the economic advantage of aluminum scrap relative to primary aluminum. If primary aluminum prices continue to decline subsequently, while aluminum scrap remains resilient supported by tight supply, the price spread between primary aluminum and scrap will face the risk of further narrowing, and the substitution effect of primary aluminum for scrap will accelerate. Close attention should be paid to changes in primary aluminum prices and the price spread between primary aluminum and scrap, as well as the crowding-out effect of primary aluminum substitution on aluminum scrap demand.

Secondary Aluminum Alloy:

This week, ADC12 prices continued to fluctuate narrowly. As of today, the SMM ADC12 quotation was adjusted down by 100 yuan/mt from last Thursday to 24,000 yuan/mt. During the week, cost support from aluminum scrap remained, and enterprises showed limited willingness to cut prices proactively; however, constrained by weak off-season demand, upward price momentum was also lacking, and the market overall exhibited a bargaining pattern of "holding prices firm for shipments and closing deals based on orders." On the cost side, primary aluminum prices edged up this week, driving aluminum scrap prices to follow. Meanwhile, there is no sign of easing in the tax invoice policy, and the supply of compliant aluminum scrap remains tight, with short-term cost support for ADC12 prices staying solid. On the demand side, the traditional consumption off-season has deepened further, downstream order releases have been limited, and market transaction activity has been sluggish. The demand side's boost to price increases is clearly insufficient, and short-term demand improvement remains limited. The market still needs to wait for the growth support from the recovery of peak season orders. On the supply side, the operating rate of industry leaders in the secondary aluminum sector fell by 0.4 percentage points WoW to 50.8% this week, at a lower level for the same period in recent years. Insufficient tax invoices and the demand off-season jointly suppressed enterprise production enthusiasm. In terms of inventory, social inventory of cast aluminum alloy ingots in China dropped to 25,900 mt, down by 3,800 mt WoW, marking eight consecutive weeks of destocking, with a cumulative destocking of 37,000 mt. However, as demand remained weak, the pace of inventory decline further slowed from earlier periods, with the current situation more reflecting limited new arrivals due to low operating rates and continuous shipments from spot and futures traders jointly driving destocking. In terms of imports, overseas ADC12 quotations further pulled back to $3,050-$3,160/mt, while domestic prices remained relatively firm supported by costs. The price spread between Chinese and overseas markets has continued to repair, and import losses have narrowed to within 1,000 yuan/mt, with the import window improving slightly from earlier, but short-term import growth is expected to remain limited. Overall, short-term ADC12 prices will continue to move sideways. On the cost side, tight aluminum scrap supply and tax invoice policies continue to build a price bottom, and enterprises hold firm in their willingness to maintain prices; however, weak off-season demand and slow recovery of end-user orders will continue to suppress upside room. Moving forward, close attention should be paid to primary aluminum price trends, changes in tax invoice policies, aluminum scrap circulation, and the pace of peak season order recovery.