ADC12 Prices Rise for Consecutive Weeks, Profit Improvement and Marginal Demand Recovery [Aluminum Scrap and Secondary Aluminum Weekly Review]

Aluminum scrap:

This week, domestic aluminum scrap prices in China remained largely stable, with some slight increases. Although primary aluminum prices rose notably, aluminum scrap struggled to catch up, and the price difference between A00 aluminum and aluminum scrap stayed high. In terms of prices, as of September 3, SMM A00 aluminum prices closed at 24,350 yuan/mt, up 430 yuan/mt from last Thursday, while domestic aluminum scrap prices fluctuated only modestly overall, with increases significantly smaller than those of primary aluminum. Mainstream scrap types such as shredded aluminum tense scrap, aluminum tense scrap castings, and bare bright aluminum wire were mostly quoted steady, with only some regional traders slightly raising purchase prices in line with the market. In terms of price spreads, on September 3, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,461 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,240 yuan/mt, widening further WoW. On the import side, previously traded cargoes arriving at ports provided some supplement to domestic supply, with port quotes for imported shredded aluminum holding near $2,485/mt, stable MoM. However, the UAE export ban and the EU tariff hike continued to weigh, with the contraction in European and Middle Eastern supply unchanged. Premium scrap with invoices remained tight overall, leaving limited room for import growth. A substantive recovery in end-use demand still needs to be observed, and inventory digestion for wrought aluminum alloy scrap will take time. Scrap utilization enterprises are likely to continue purchasing as needed and maintain low-inventory operating strategies, with the pace of price catch-up expected to remain slow. Next week, the aluminum scrap market is expected to consolidate on a strong note with a slight upward shift in price center. The mainstream operating range for shredded aluminum tense scrap (priced based on aluminum content) is expected to center around 20,300-21,000 yuan/mt, with close attention needed on the pace of downstream order recovery.

Secondary aluminum alloy:

This week, ADC12 market prices rose for consecutive sessions. As of Thursday, prices had accumulated a weekly gain of 350 yuan/mt to 24,300 yuan/mt. On the cost side, aluminum prices held up well this week, further strengthening cost support for ADC12 raw materials. Enterprises showed increased willingness to raise prices, driving spot quotes higher. As the increase in finished alloy ingot prices outpaced that of costs, theoretical industry profit margins improved recently. On the demand side, September marks the traditional peak consumption season, and market orders recovered somewhat from August. However, peak-season characteristics are not yet pronounced, with end-user purchasing improvements still limited and overall market transactions remaining moderate. On the supply side, the operating rate of industry leaders in the secondary aluminum sector rose 1.4 percentage points WoW to 51.6% this week. Production enthusiasm improved amid peak-season expectations, but overall operating levels remained relatively low. Social inventory increased to 33,000 mt, up 1,200 mt WoW, marking the fourth consecutive week of inventory buildup, though still down 53.8% YoY. On the import side, overseas ADC12 quotes held steady at $3,050-3,180/mt. As domestic prices rose, import losses narrowed to around 400 yuan/mt, but the import window remained closed, with limited short-term pressure from overseas supply growth. In the short term, ADC12 prices are expected to consolidate on a strong note, with further upside room for the price center. Strong aluminum prices on the cost side, aluminum scrap prices fluctuating at highs, and the closed import window will continue to provide support. If peak-season demand in September is further released and drives end-user restocking, prices still have upside room. However, with social inventory building for consecutive weeks and operating rates rebounding while demand has yet to show significant volume growth, price increases still rely mainly on cost and futures drivers, and sustainability remains to be seen. Going forward, close attention should be paid to the extent to which peak-season demand materializes and to changes in raw material supply.