Falling Costs Coupled with Off-Season Double Inventory Buildup, ADC12 Consolidates on a Subdued Note [Aluminum Scrap and Secondary Aluminum Weekly Review]

Aluminum scrap:

This week, domestic aluminum scrap prices in China followed the primary aluminum pullback, showing a pattern of high-level weakness. However, cost support remained, limiting the decline. On August 20, SMM A00 spot aluminum ingot prices closed at 23,600 yuan/mt, down 520 yuan/mt from 24,120 yuan/mt last Thursday. Dragged down by the fall in primary aluminum prices, aluminum scrap prices pulled back, but thanks to cost support and tight supply, the decline in scrap was relatively limited, maintaining its resilience. In terms of price spreads, on August 20, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,360 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,150 yuan/mt. Domestically, the impact of the reverse invoicing policy deepened, with compliant invoiced aluminum scrap scarcity rising continuously, constraining the operating rates and procurement of scrap utilization enterprises. On imports and exports, according to SMM customs data, China's aluminum scrap imports in July 2026 totaled approximately 119,600 mt, down MoM from 133,000 mt in June, mainly due to the inverted price spread between Chinese and overseas markets and shipment delays, keeping the supplement of high-quality overseas scrap at a low level. Affected by the UAE's aluminum scrap export ban and the EU's tariff hike policy, the contraction effect of supply from Europe and the Middle East continued to show, further consolidating Southeast Asia's position as a major supplementary source. Next week, the aluminum scrap market is expected to continue its narrow sideways movement pattern under demand suppression and cost support. Currently, the traditional off-season is nearing its end, with no substantial breakout in downstream end-user orders. Scrap utilization enterprises continue to adopt a purchase-as-needed strategy with cautious procurement sentiment, and the pre-peak season effect is not yet apparent. Enterprises need to wait and see for subsequent order intake. The mainstream operating range for shredded aluminum tense scrap (priced based on aluminum content) is expected to be between 19,900 and 20,700 yuan/mt.

Secondary aluminum alloy:

This week, ADC12 prices rose first and then fell, stabilizing later. Today, SMM ADC12 fell 300 yuan/mt from last Thursday to 23,900 yuan/mt. On the cost side, aluminum scrap prices followed aluminum prices down, but compliant raw material costs remained at a relatively high level. Among cost components, copper and silicon prices edged up, and overall production costs were slightly lower than before. However, as selling prices fell faster than costs, the industry's theoretical losses widened slightly. On the demand side, it is still the hot off-season, with weak end-user orders and downstream mainly making just-in-time procurement. Prices fell during the week but did not trigger concentrated dip-buying downstream, and market restocking willingness remained weak. Some secondary aluminum enterprises, affected by sluggish shipments, saw a buildup in finished product inventories, increasing their willingness to sell at lower prices, putting downward pressure on prices. With the hot weather gradually easing, demand is expected to improve marginally. On the supply side, this week's operating rate of industry leaders in secondary aluminum remained stable at 49.1%, still at a low level for the period. China's social inventory of cast aluminum alloy ingots rose to 28,100 mt, up 2,500 mt MoM, marking the second consecutive week of inventory buildup, with the pace of buildup accelerating. Under weak off-season demand, inventory pressure further emerged. On imports, overseas ADC12 quotes fell to $3,050-3,190/mt, with the immediate import loss remaining around 1,000 yuan/mt. The import window remained closed, and overseas supply supplement was limited. Looking ahead, ADC12 prices are expected to consolidate on a subdued note in the near term. On the cost side, high compliant raw material costs, the closed import window, and low operating rates form a floor for prices, limiting downside room. However, weak end-use consumption, insufficient downstream purchase willingness, and the simultaneous buildup of enterprise finished product and social inventories leave prices lacking upward momentum. Should the hot off-season end and end-user orders improve substantially, prices could regain upward momentum.