Activity in the Aluminum Scrap Market Weakens; Downstream Stockpiling Conditions Are Poor [Weekly Review of Aluminum Scrap and Secondary Aluminum]

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Secondary Aluminum Raw Materials:

This week, domestic primary aluminum spot prices remained fluctuating between 20,020-20,200 yuan/mt. During the week, the price difference between primary metal and scrap fluctuated rangebound, and trading in the aluminum scrap market weakened, mainly due to downstream entering the holiday period, leading to weaker purchasing demand. Additionally, the "reverse substitution of primary aluminum" has re-emerged in the market, resulting in poor stockpiling sentiment for the Chinese New Year among downstream scrap-using enterprises. Furthermore, in terms of aluminum scrap supply, domestic supply saw no significant increase as upstream and downstream enterprises gradually went on holiday. Overseas, the price trend of primary aluminum remained as LME outperforms SHFE, leaving overseas aluminum scrap prices uncompetitive. Coupled with many companies halting shipments at year-end, aluminum scrap supply is unlikely to see significant changes in the short term. As of this Thursday, the SMM A00 spot price was 20,200 yuan/mt, up 530 yuan/mt from last Thursday. The Shanghai aluminum tense scrap price was 18,391 yuan/mt (excluding tax), up 543 yuan/mt from last Thursday, while the Shanghai aluminum tense scrap-primary aluminum price difference narrowed by 233 yuan/mt to 1,535 yuan/mt. The Foshan aluminum extrusion scrap-primary aluminum price difference expanded by 330 yuan/mt to 1,921 yuan/mt compared to last Thursday. In the short term, domestic aluminum scrap supply remains tight with little improvement, and downstream secondary aluminum processing enterprises have entered the off-season. With weak supply and demand for aluminum scrap, the price difference between primary metal and scrap is expected to fluctuate rangebound.

Secondary Aluminum Alloy:

This week, secondary aluminum alloy prices mainly followed the upward trend of aluminum prices. As of January 16, the SMM ADC12 price increased by 200 yuan/mt from last Thursday to 21,000 yuan/mt. On the cost side, aluminum prices rose this week, improving the enthusiasm of aluminum scrap traders to sell. However, as the Chinese New Year holiday approaches, some traders have started to halt operations, and the circulation of aluminum scrap in the market remains tight, leading to overall price increases in line with aluminum prices. This further pushed up aluminum scrap costs, continuing to support ADC12 prices. Meanwhile, copper costs saw a slight increase during the week, while silicon costs declined. The price of above-standard #553 silicon fell by 250 yuan/mt to 10,850 yuan/mt, further reducing silicon's share in ADC12's total cost. On the demand side, due to recent significant fluctuations in the aluminum market and cautious sentiment towards the post-holiday market, coupled with the long holiday period, downstream just-in-time procurement dominated, with average pre-holiday stockpiling sentiment. Additionally, secondary aluminum plants maintained relatively low finished product inventories, and manufacturers were cautious in taking orders. On the supply side, most secondary aluminum plants continued production this week, but they are expected to halt operations and go on holiday starting January 20. Regarding imports, current overseas ADC12 prices are in the range of $2,440-2,470/mt. Due to the slight strengthening of domestic prices, the immediate loss on imported ADC12 narrowed to within 400 yuan/mt. Overall, high costs and low inventories drove ADC12 prices up during the week. With the Chinese New Year approaching, accompanied by downstream holidays and the gradual suspension of logistics, transactions are expected to decrease significantly next week, and ADC12 prices are expected to fluctuate rangebound along with A00 prices.