ADC12 secondary aluminium alloy market review in December and forecast for January  

Tracking swings of aluminium price, ADC12 secondary aluminium alloy price inched down in the first half of December. The highest cash price of ADC12 was at a premium of 500 yuan/mt over A00 aluminium price, and then ADC12 price surged, in line with A00 aluminium price uptick. Therefore, the price difference between the two remained at 200-400 yuan/mt. As of December 29, offers from large secondary aluminium plants in China increased by nearly 1,000 yuan/mt MoM to 20,100-20,300 yuan/mt, while those from small and medium-sized ones were up 900 yuan/mt MoM at 19,600-19,800 yuan/mt.

In terms of aluminium scrap: Domestically, snowfalls occurring frequently in north China and resurgent environmental inspections in various places further hobbled the operating rate and transportation of recycling and dismantling plants. In addition, the operating rate of downstream sectors was low in December. Under this circumstance, overall aluminium scrap supply decreased. In terms of imports, aluminium scrap import market suffered losses, leading to limited imports flowing into China. Given that a decline in imported and domestic goods since December further tightened aluminium scrap supply, suppliers opted to ship goods at high prices. Scrap users jostled for aluminium scrap on a need-to basis, keeping pushing up aluminium scrap price. Therefore, price difference between A00 aluminium and aluminium scrap narrowed.

In terms of silicon, silicon prices kept going up in December. As of December 29, above-standard 553# silicon price was 15,600 yuan/mt, up 900 yuan/mt or 6.1% MoM. ADC12’s silicon cost alone hiked by 40-60 yuan/mt. Overall, cost pressure of ADC12 rose in December. In addition to rising aluminium scrap costs, prices of auxiliary materials such as silicon and copper also increased. In addition, natural gas price moved up in winter in some areas. Under this circumstance, ADC12 price made gains, and then industry profits picked up to a certain extent.

From the demand side, secondary aluminium demand was sluggish in December. Most producers reported a decrease in new orders, while a few saw an increase in orders due to pre-holiday stockpiling by downstream companies. In addition, a rapid rise in ADC12 price fuelled downstream buyers’ fears of high prices, and they purchased ADC12 for captive use. Meanwhile, secondary aluminium producers were also in a prudent mood. Therefore, trading activity was minimal. The overall sluggish demand offered very limited support for secondary aluminium price.

From the supply side, the operating rate of secondary aluminium industry dipped in December. On the one hand, tight raw material supply and cost inversion led some producers to lower the operating rate. On the other hand, after mid-December escalating environmental protection-related production restrictions in Hebei, Anhui, Shandong and other provinces and cities where secondary aluminium plants gathered fed into production cuts and halts of local makers. Looking into January, as downstream die-casting plants will enter the Chinese New Year holiday, new orders and output of secondary aluminium will decline.

Overall, ADC12 prices rose rapidly in December due to rising costs. With upcoming the Chinese New Year holiday, aluminium scrap supply will remain tight, offering some support for secondary aluminium. Therefore, short-term secondary aluminium market will swing on a bullish trajectory. However, it is expected that more die-casting factories will take the Chinese New Year holiday ahead of schedule due to weakening orders, and will have muted replenishing demand amid high secondary aluminium price, which could potentially weigh down secondary aluminium price later this month.