The Secondary Aluminum Market Slowly Recovers in the First Week After the Holiday, with Trading Remaining Sluggish [Weekly Review of Aluminum Scrap and Secondary Aluminum]

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Secondary Aluminum Raw Materials:

During the Chinese New Year holiday, both upstream and downstream sectors entered the holiday period, resulting in sluggish market transactions. Domestic spot primary aluminum prices fluctuated rangebound, and after the holiday, aluminum ingot inventories built up while downstream operations had not fully resumed, leading to an expansion in spot discounts for primary aluminum. The price difference between primary metal and scrap fluctuated rangebound during the period. The aluminum scrap market remains in the holiday cycle with limited market activity. Additionally, in terms of overseas aluminum scrap supply, LME outperforms SHFE, and overseas aluminum scrap prices fluctuated at highs, making it difficult to increase volumes. In the short term, aluminum scrap supply is unlikely to see significant improvement. As of Thursday this week, SMM A00 spot price was 20,230 yuan/mt, up 110 yuan/mt from the last trading day before the holiday; Shanghai aluminum tense scrap price was 18,364 yuan/mt, up 82 yuan/mt from the last trading day before the holiday. The price difference between A00 aluminum and aluminum tense scrap in Shanghai narrowed by 28 yuan/mt to 1,866 yuan/mt on the last trading day before the holiday, while the price difference between A00 aluminum and aluminum extrusion scrap in Foshan expanded by 140 yuan/mt to 2,141 yuan/mt on the last trading day before the holiday. In the short term, the tight domestic aluminum scrap supply pattern remains unchanged, and the price difference between primary metal and scrap is expected to fluctuate rangebound. Further tracking of upstream and downstream resumption times and progress is needed.

Secondary Aluminum Alloy:

This week marked the first trading week after the Chinese New Year holiday, and the secondary aluminum market is still gradually recovering. Currently, upstream aluminum scrap traders have not resumed operations on a large scale, and secondary aluminum plants are mainly consuming inventory. Meanwhile, downstream die-casting enterprises have not fully resumed operations, leading to a slower recovery on the demand side. Although secondary aluminum enterprises have resumed operations on the sales side, insufficient demand has resulted in a sluggish market atmosphere and low trading volume. Additionally, post-holiday aluminum prices have shown slight fluctuations, and secondary aluminum plants generally maintain a wait-and-see attitude toward price adjustments, mostly continuing pre-holiday price levels. As of Thursday this week, SMM ADC12 prices remained unchanged from last Monday at 21,100 yuan/mt. However, aluminum scrap prices have started to partially follow the rise in aluminum prices, providing cost support for enterprises. On the production side, large secondary aluminum plants or direct aluminum liquid supply enterprises resumed production between January 31 and February 5, while other enterprises mainly resumed production between February 6 and 9, with the latest expected to restart around February 15. Therefore, the industry's operating rate has significantly rebounded this week but is expected to gradually return to normal levels next week. On the import side, imported ADC12 overseas prices slightly declined compared to pre-holiday levels, reaching the range of $2,420-2,450/mt. The immediate break-even point for imported ADC12 has recovered from previous losses to near the break-even line. Overall, the recovery of secondary aluminum consumption has not been fully achieved, but raw material costs still provide some support for ADC12 prices. In the short term, ADC12 prices are expected to remain firm.