Secondary Aluminum Alloy Prices Slightly Increase Amid Stability, Driven by Cost Pressure [Weekly Review of Aluminum Scrap and Secondary Aluminum]

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Secondary Aluminum Raw Materials:

This week, domestic primary aluminum spot prices continued to fluctuate rangebound between 19,700-19,900 yuan/mt. The aluminum scrap market remained stable, with the price difference between primary metal and scrap fluctuating rangebound during the week. As year-end approaches and many regions will fully implement reverse invoicing starting January 1, individual small traders mostly adopted a wait-and-see attitude, while large traders continued normal transactions. Overall, aluminum scrap supply remained tight, keeping sellers in a dominant position, and reverse invoicing had limited impact on traders' shipments. Regarding aluminum scrap imports during the week, the price trend of LME outperforms SHFE for primary aluminum remained unchanged, leaving overseas aluminum scrap prices uncompetitive. Coupled with many companies halting shipments at year-end, short-term aluminum scrap supply is unlikely to see significant changes. Additionally, on December 30, 2024, the State Council Tariff Commission announced that starting January 1, 2025, import tariff rates and tariff items for certain goods would be adjusted, with a provisional tariff rate of 0 set for "secondary aluminum and aluminum alloy raw materials." In terms of prices, as of this Thursday, the SMM A00 spot price was 19,870 yuan/mt, up 50 yuan/mt from last Thursday. The Shanghai aluminum tense scrap price was 17,984 yuan/mt (excluding tax), down 54 yuan/mt from last Thursday, while the price difference between A00 aluminum and aluminum tense scrap in Shanghai widened by 104 yuan/mt to 1,886 yuan/mt. The price difference between A00 aluminum and aluminum extrusion scrap in Foshan narrowed by 79 yuan/mt to 1,605 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 likely to fluctuate rangebound.

Secondary Aluminum Alloy:

This week, secondary aluminum alloy prices saw slight overall increases. As of January 2, the SMM ADC12 price rose by 100 yuan/mt from last Thursday to 20,900 yuan/mt. Cost side, the secondary aluminum market continued to face procurement pressure this week. In some regions, reverse invoicing has been implemented, and due to the undersupply of aluminum scrap, secondary aluminum plants struggled to pass on increased costs to upstream aluminum scrap traders. As a result, ADC12 prices were more likely to rise than fall under cost-driven pressure. Demand side, fluctuations were relatively small, with secondary aluminum plants focusing on fulfilling backlog orders and delivering earlier orders. Pre-holiday restocking by downstream sectors has not yet started. Supply side, disruptions from material shortages and environmental protection measures led to reduced operating rates at secondary aluminum plants in Sichuan, Chongqing, Jiangsu, and other regions, causing finished product inventories to decline further. Tight supply provided some support for secondary aluminum alloy prices. Currently, most secondary aluminum plants have not finalized their Chinese New Year production holiday schedules, which will depend on downstream demand. Regarding imports, overseas ADC12 prices remained in the range of $2,430-2,460/mt. Although domestic prices slightly increased, the slight depreciation of the yuan led to an expansion in per-ton immediate losses for imported ADC12 to the range of 400-500 yuan. Overall, facing low inventory levels and high cost pressures, ADC12 prices are expected to remain firm in the short term.