Raw Material Shortage Combined With Environmental Protection-Related Controls Weakens Operating Rate of Secondary Aluminum Producers [Weekly Review of Aluminum Scrap and Secondary Aluminum]

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Secondary Aluminum Raw Materials:

This week, domestic primary aluminum spot prices remained largely stable, with moderate spot transactions. The price difference between primary metal and scrap fluctuated within a narrow range. In Anhui and Henan, agreements for reverse invoicing began to be signed, while suppliers grew concerned about renewed price suppression sentiment. During the week, in terms of aluminum scrap imports, the price trend of primary aluminum remained unchanged, with LME outperforms SHFE. Overseas aluminum scrap prices lacked competitiveness, compounded by the Christmas season overseas, where traders showed low willingness to sell during the holiday. Additionally, after the implementation of new regulations on aluminum scrap imports, import volumes showed no significant changes. Overall, in the short term, aluminum scrap supply is unlikely to see notable changes. As of this Thursday, the SMM A00 spot price was 19,820 yuan/mt, up 140 yuan/mt from last Thursday. The Shanghai machine aluminum tense scrap price was 18,038 yuan/mt (excluding tax), unchanged from last Thursday, while the price difference between primary metal and scrap for Shanghai machine aluminum tense scrap narrowed by 630 yuan/mt to 1,752 yuan/mt compared to last Thursday. The price difference between primary metal and scrap for Foshan aluminum extrusion scrap fell by 140 yuan/mt to 1,782 yuan/mt compared to last Thursday. In the short term, domestic aluminum scrap supply remains tight with little improvement expected, and the price difference between primary metal and scrap is expected to fluctuate rangebound.

Secondary Aluminum Alloy:

This week, secondary aluminum alloy prices were more likely to rise than fall. As of December 26, the SMM ADC12 price increased by 100 yuan/mt from last Thursday to 20,800 yuan/mt. On the cost side, driven by order delivery and pre-holiday stocking demand, secondary aluminum plants actively sourced materials in the market. However, insufficient aluminum scrap supply and low willingness to sell among traders continued to pose challenges for raw material procurement, disrupting the stocking pace of enterprises. Recently, aluminum prices have been trending downward, and some aluminum scrap traders, under the pressure of losses, are considering halting operations after the New Year holiday. However, the use of primary aluminum as a substitute for aluminum scrap in ADC12 production has not yet occurred, as the production process requires additional copper and other auxiliary materials, making the cost of primary aluminum production still higher than that of aluminum scrap. On the demand side, due to concerns over production losses and order delivery pressure, secondary aluminum plants are primarily focused on fulfilling long-term contracts or orders from long-established customers, taking orders cautiously. Currently, finished product inventories at secondary aluminum enterprises are generally low, and manufacturers are actively sourcing low-cost materials from traders to replenish inventories. On the supply side, raw material shortages and environmental protection-related controls continue to drag down the operating rate of secondary aluminum plants. In regions such as Henan and Sichuan, secondary aluminum plants face production cuts or shutdown pressures due to the heating season or orange alert warnings. On the import side, current overseas ADC12 prices range between $2,430-2,460/mt. Due to relatively stable domestic and overseas prices and recent exchange rates, the immediate loss per ton for imported ADC12 remains within 400 yuan. Overall, as the market approaches January, aluminum scrap supply may tighten further, and the raw material shortage dilemma remains unresolved. Secondary aluminum alloy prices are expected to maintain a resilient stance, remaining more likely to rise than fall overall.