The Price Difference Between Primary Metal and Scrap Expanded During the Week; Increased Supply and Insufficient Demand Suppressed the Price Rise of ADC12 [Weekly Review of Aluminum Scrap and Secondary Aluminum]

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Secondary Aluminum Raw Materials:

Currently, with the holiday in the aluminum industry coming to an end, upstream and downstream enterprises have largely resumed operations. The aluminum scrap market also saw some improvement in transactions during the week. However, due to the limited recovery in downstream operating rates, the price increase of aluminum scrap was moderate, leading to a widening price difference between primary metal and scrap. Specifically, in terms of prices, primary aluminum prices fluctuated upward during the period, with the center moving higher. Coupled with the limited price increase of aluminum scrap, the price difference between primary metal and scrap widened. In terms of aluminum scrap supply, after the Lantern Festival, domestic aluminum processing has largely resumed operations, providing support for new scrap supply. Regarding overseas aluminum scrap supply, Southeast Asian traders reported an increase in shipments compared to the pre-holiday period. However, considering the tightening trend in Southeast Asia's aluminum scrap export policies, some traders expressed concerns about the impact on future supply. As of this Thursday, the SMM A00 spot price was reported at 20,690 yuan/mt, up 180 yuan/mt WoW. The Shanghai aluminum tense scrap price was 18,825 yuan/mt, up 190 yuan/mt WoW. The price difference between A00 aluminum and Shanghai aluminum tense scrap narrowed by 10 yuan/mt to 1,865 yuan/mt on the last trading day before the holiday. Meanwhile, the price difference between A00 aluminum and Foshan aluminum extrusion scrap widened by 150 yuan/mt to 2,398 yuan/mt on the last trading day before the holiday. In the short term, both supply and demand for domestic aluminum scrap are increasing. However, constrained by the slow recovery in downstream operations, demand has not shown significant growth. As a result, the price increase of aluminum scrap is expected to remain limited, with the price difference between primary metal and scrap likely to widen slightly. Continuous monitoring of changes in domestic and overseas aluminum scrap supply is necessary.

Secondary Aluminum Alloy:

This week, secondary aluminum alloy prices remained stable overall. As of February 20, the SMM ADC12 price was unchanged from the previous week at 21,300 yuan/mt. Cost side, with increased domestic aluminum scrap circulation and import replenishment, the aluminum scrap market supply appeared slightly loose, easing raw material procurement pressure for secondary aluminum plants. However, overall costs remained at a high level. Demand side, downstream demand recovery during the week was slower than expected, with weak release of end-use orders. Additionally, downstream procurement was mainly just-in-time, resulting in a lack of upward momentum for market prices. Supply side, as secondary aluminum plants steadily resumed operations after the holiday, market supply showed an increasing trend. In the latter half of the week, the rebound in primary aluminum prices failed to drive secondary aluminum alloy prices upward. Instead, intensified competition on the supply side led some suppliers to offer discounts, increasing the availability of low-priced goods in the market. This supply looseness exerted some downward pressure on prices. In terms of imports, current overseas ADC12 prices rose to the range of $2,440-2,480/mt. Due to the faster price increase overseas compared to domestic prices, the immediate profit per ton for imported ADC12 quickly narrowed to within 100 yuan. Overall, ADC12 prices are expected to continue fluctuating rangebound in the short term. Upside room is constrained by supply pressure and the slow pace of demand recovery, while downside is supported by aluminum scrap costs. Close attention should be paid to recent raw material circulation and the recovery of end-use consumption.