Secondary Aluminum Alloy Resilience Stands Out as Price Spread with Primary Aluminum Recovers to Positive[SMM Analysis]

During the week, the aluminum scrap market pulled back from highs and fluctuated in the doldrums overall, following a sharp drop in primary aluminum prices. As of June 11, SMM A00 spot aluminum closed at 23,780 yuan/mt, down 340 yuan/mt WoW. On the price difference front, on June 11 the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan registered 2,598 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap stood at 2,060 yuan/mt, with the sustained narrowing of these spreads reflecting relatively strong support at the bottom for aluminum scrap.

Supply side, the "reverse invoicing" policy oversight has continued to tighten. In some provinces, tax rebates were canceled and tax audits intensified, pushing up the cost of invoice-attached raw materials. Production cuts and halts further spread among enterprises in Anhui, Jiangxi, and Hubei. Currently, compliance costs in the raw material collection segment remain elevated, the availability of invoice-attached cargoes stays tight, and the scarcity of invoices has become the core pillar supporting aluminum scrap prices. Meanwhile, the persistent inversion of price spreads between Chinese and overseas markets has kept cheap, high-quality imports scarce, further weakening the supplement to the domestic market.

Demand side, the off-season impact continues to deepen. Downstream scrap utilization enterprises are running at low operating rates, with end-user order follow-through proving sluggish. Enterprises maintain a strategy of purchasing as needed and keeping low inventories, resulting in a cautious procurement atmosphere. Aluminum scrap prices are expected to remain in the doldrums at high levels, though the downside room is limited. The tight supply of compliant invoice-attached cargoes will persist, with invoice scarcity providing bottom support for aluminum scrap prices. The lagging contraction effect from imported aluminum scrap has yet to fully play out, and port arrivals will run at low levels going forward. The renewed escalation of the US-Iran conflict has aggravated the inversion of price spreads between Chinese and overseas markets, keeping import supplement constrained. At the same time, as the off-season deepens, order sustainability for downstream scrap utilization enterprises is worrying. These enterprises continue to purchase as needed and maintain low inventories, and the procurement atmosphere is unlikely to improve markedly. If the situation of invoice shortages and tight raw material supply continues to ferment, production cuts will expand further across the industry, reinforcing expectations of supply-side contraction, while weak downstream demand acts as a drag, resulting in an overall supply-demand both weak pattern. 

During the week, the aluminum scrap market pulled back from highs and fluctuated in the doldrums overall, following a sharp drop in primary aluminum prices. As of June 11, SMM A00 spot aluminum closed at 23,780 yuan/mt, down 340 yuan/mt WoW. On the price difference front, on June 11 the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan registered 2,598 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap stood at 2,060 yuan/mt, with the sustained narrowing of these spreads reflecting relatively strong support at the bottom for aluminum scrap.

Supply side, the "reverse invoicing" policy oversight has continued to tighten. In some provinces, tax rebates were canceled and tax audits intensified, pushing up the cost of invoice-attached raw materials. Production cuts and halts further spread among enterprises in Anhui, Jiangxi, and Hubei. Currently, compliance costs in the raw material collection segment remain elevated, the availability of invoice-attached cargoes stays tight, and the scarcity of invoices has become the core pillar supporting aluminum scrap prices. Meanwhile, the persistent inversion of price spreads between Chinese and overseas markets has kept cheap, high-quality imports scarce, further weakening the supplement to the domestic market.

Demand side, the off-season impact continues to deepen. Downstream scrap utilization enterprises are running at low operating rates, with end-user order follow-through proving sluggish. Enterprises maintain a strategy of purchasing as needed and keeping low inventories, resulting in a cautious procurement atmosphere. Aluminum scrap prices are expected to remain in the doldrums at high levels, though the downside room is limited. The tight supply of compliant invoice-attached cargoes will persist, with invoice scarcity providing bottom support for aluminum scrap prices. The lagging contraction effect from imported aluminum scrap has yet to fully play out, and port arrivals will run at low levels going forward. The renewed escalation of the US-Iran conflict has aggravated the inversion of price spreads between Chinese and overseas markets, keeping import supplement constrained. At the same time, as the off-season deepens, order sustainability for downstream scrap utilization enterprises is worrying. These enterprises continue to purchase as needed and maintain low inventories, and the procurement atmosphere is unlikely to improve markedly. If the situation of invoice shortages and tight raw material supply continues to ferment, production cuts will expand further across the industry, reinforcing expectations of supply-side contraction, while weak downstream demand acts as a drag, resulting in an overall supply-demand both weak pattern.