ADC12 Cost Support Continues, Pre-Holiday Demand Mildly Improves [Aluminum Scrap and Secondary Aluminum Weekly Review]

Aluminum scrap:

This week, China's aluminum scrap market remained relatively stable. As of September 24, SMM A00 aluminum prices closed at 24,240 yuan/mt, up slightly by 60 yuan/mt from 24,180 yuan/mt last Thursday, with domestic aluminum scrap market prices holding steady overall. In terms of price spreads, on September 24, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,482 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,261 yuan/mt. On the import side, aluminum scrap imports in August were 142,000 mt, up 18.60% MoM but down 17.67% YoY, ending the four consecutive monthly declines since April; cumulative imports from January to August were about 1.243 million mt, down about 7.5% YoY. The MoM recovery in August was mainly driven by the resumption of shipping schedules and replenishment of Southeast Asian supply. In terms of supply, tax audits in Henan, Hunan, and other regions continued to intensify and expand, with compliant invoiced aluminum scrap becoming increasingly scarce and prices receiving strong support; meanwhile, non-invoiced supply saw narrowing sales channels under compliance pressure, with some traders forced to cut prices to sell, keeping prices under persistent downward pressure. In terms of demand, the cast aluminum alloy "September peak season" fell short of expectations, with demand yet to see substantial release; wrought aluminum alloy demand was moderate, and in-factory aluminum scrap inventory was relatively ample. Next week, the aluminum scrap market is expected to continue consolidating on a strong note, with mainstream shredded aluminum tense scrap (priced based on aluminum content) expected to trade around 20,500-21,200 yuan/mt. Close attention should be paid to the scope of tax audit expansion and downstream stocking before the National Day holiday.

Secondary aluminum alloy:

This week, SMM ADC12 prices held steady at 24,500 yuan/mt during the week. On the cost side, aluminum scrap raw material prices fluctuated only slightly this week, but the impact of stricter tax invoice policy enforcement became more evident. Enterprises faced higher compliance procurement requirements, invoiced aluminum scrap supply was relatively tight, and some enterprises' comprehensive raw material procurement costs remained elevated. With strong cost support, even as aluminum prices and futures pulled back in stages, ADC12 producers had limited room to proactively lower prices. In the short term, the cost side is expected to remain a key factor supporting prices. On the demand side, end-use orders in September improved only marginally, with downstream procurement still primarily need-based. This week, pre-Mid-Autumn Festival stocking demand was released to some extent, but the overall intensity was mild, providing insufficient support for price increases. As the National Day holiday approaches, pre-holiday restocking demand may increase further, but whether demand can sustain improvement after the holiday remains to be seen. On the supply side, the operating rate of industry leaders in the secondary aluminum sector held at 53.3% this week. Most sampled enterprises maintained production during the Mid-Autumn Festival, while some arranged production halts of about 3 days for National Day. This year, enterprises generally had more holiday days, mainly affected by tight raw material supply, high procurement costs, stricter tax invoice compliance requirements, and downstream clients' holiday arrangements. Some enterprises adjusted production by reducing loads, conducting maintenance, or extending holidays. On the inventory side, domestic cast aluminum alloy ingot social inventory fell to 31,800 mt this week, down 2,700 mt MoM, ending six consecutive weeks of inventory buildup. The widening spot-futures price spread and pre-holiday stockpiling drove inventory destocking; further destocking is expected before National Day. On the import side, overseas ADC12 quotes remained in the range of $3,100-3,200/mt, with import profit margins near breakeven. In the short term, ADC12 prices are expected to consolidate on a strong note. Pre-National Day stocking demand is expected to drive phased improvement in spot transactions, and social inventory may destock further. Meanwhile, the impact of stricter tax invoice policies on compliant aluminum scrap supply and procurement costs may persist, providing relatively solid support below prices. However, as end-use demand has yet to show sustained improvement and high prices still somewhat constrain downstream procurement, room for further price increases may be limited. Going forward, close attention should be paid to the actual release of pre-holiday stocking, progress in tax invoice policy enforcement, and changes in aluminum scrap supply.