SMM: Analysis of China's Secondary Aluminum Market and Price Assessment Methodology for 2025 [SMM Aluminum Industry Conference]

On April 18, at the AICE 2025 SMM (20th) Aluminum Industry Conference & Aluminum Industry Expo - Global Secondary Aluminum Industry Development Forum, co-hosted by SMM Information & Technology Co., Ltd., SMM Metal Trading Center, and Shandong Aisi Information Technology Co., Ltd., and co-organized by Zhongyifeng Jinyi (Suzhou) Technology Co., Ltd. and Lezhi County Qianrun Investment Service Co., Ltd., Zhang Limin, Senior Analyst of Secondary Aluminum at SMM, shared insights on the 2025 China secondary aluminum market analysis and price assessment methodology. 1. Overview of the Aluminum Scrap Industry Chain Supply Side - Explosive Growth in Old Scrap in Recent Years ► SMM Analysis: • The recycling of old aluminum scrap is influenced by multiple factors. Currently, the recycling of old aluminum scrap mainly comes from social scrap collected over an average period of 10-20 years, involving fields such as construction, transportation, power, packaging, and durable goods. Among these, construction and transportation sectors dominate the recycled materials. In recent years, with more aluminum scrap gradually entering the recycling cycle and the introduction of policies like "trade-in," old scrap has entered a phase of explosive growth. • New aluminum scrap mainly comes from aluminum and downstream rolling and casting processes, including off-cuts and defective products. Additionally, some scrap generated during the use of end-use industries is also high-quality aluminum scrap. This portion of aluminum scrap is primarily influenced by the annual aluminum consumption. Supply Side - Increasing Supplement of Imported Raw Materials Since the implementation of the new standards in 2020, with traders' increasing adaptation to the new standards, aluminum scrap imports have been recovering year by year. ► SMM Analysis: • In 2018, other aluminum scrap (760200090) was adjusted to the "Catalog of Solid Wastes Restricted from Import as Raw Materials." From July 1, 2019, the import of aluminum scrap was completely banned. • In 2020, secondary cast aluminum alloy raw materials that comply with the "Secondary Cast Aluminum Alloy Raw Materials" (GB/T 38472-2019) standard are not considered solid waste and can be freely imported. This has been in effect since November 1, 2020. • On October 24, 2024, the Ministry of Ecology and Environment, the General Administration of Customs, and four other departments issued the "Announcement on Regulating the Import Management of Secondary Copper and Copper Alloy Raw Materials, Secondary Aluminum and Aluminum Alloy Raw Materials." Secondary copper and aluminum raw materials that meet the annex requirements are not considered solid waste and can be freely imported. The announcement has been in effect since November 15, 2024. According to customs data, the total imports for 2024 were 1.785 million mt, up 1.65% YoY. • In January-February 2025, aluminum scrap imports were 323,000 mt, up 12% YoY. Driven by relaxed policies and increased demand, imports are expected to show a mild growth trend for the year, but the growth rate may be constrained by international market competition and the inversion of domestic and overseas price spreads. Supply Side - Aluminum Scrap Import Policies from Standardization to Optimization ► SMM Analysis: The "Announcement on Regulating the Import Management of Secondary Copper and Copper Alloy Raw Materials, Secondary Aluminum and Aluminum Alloy Raw Materials" has removed the barriers to the import of secondary aluminum raw materials in China, providing a policy basis for legal and compliant imports. SMM expects that aluminum scrap imports in 2025 may show a restorative growth. However, with the growth of domestic old and new scrap production, the domestic aluminum scrap supply will play a significant role, reducing dependence on overseas aluminum scrap. In addition to the increase in domestic aluminum scrap supply, overseas secondary aluminum processing capacity has also shown a growth trend in recent years, with overseas aluminum scrap resources entering a period of high demand growth. Some overseas aluminum scrap resources are being consumed locally, and the opportunity for them to enter China is expected to decline. Demand Side - Secondary Aluminum Alloy Demand Slows Down, Plate/Sheet and Extrusion Become New Engines ► SMM Analysis: The downstream demand for aluminum scrap in China is mainly for the production of secondary aluminum alloys, the manufacture of remelting billets for extruded aluminum profiles, and the addition of some aluminum scrap in the aluminum plate/sheet and strip industry. In recent years, the capacity expansion in the domestic secondary aluminum industry has been significant, and the supply of aluminum scrap has been tight. According to SMM data, the domestic demand for secondary aluminum in 2024 was approximately 12.79 million mt, with an expected annual compound growth rate of 13% from 2020 to 2025. The growth rate of aluminum scrap consumption for secondary aluminum alloy ingots has slowed down, while the demand for secondary wrought alloys has been increasing year by year, continuing to drive the growth rate of the entire aluminum scrap industry. According to SMM data, in 2024, the consumption of aluminum scrap in the domestic secondary aluminum alloy industry accounted for 59% of the total consumption, down 17 percentage points from 2019, while the consumption of aluminum scrap for remelting billets accounted for about 24%, up 6 percentage points from 2019, and the consumption of secondary plate/sheet increased significantly by 11 percentage points. Policy Empowerment for Green Development, China's Secondary Aluminum Industry Enters a Golden Development Period Since the beginning of the "14th Five-Year Plan," the development of China's secondary aluminum industry has entered a policy golden period, with relevant policies being intensively introduced. The national low-carbon process has accelerated, promoting the carbon peak in the non-ferrous metal industry and accelerating the development of the secondary aluminum industry, while also injecting new momentum into the green and sustainable development of the aluminum industry. It also reviewed some of the secondary aluminum industry promotion policies from 2021 to 2025. 2. Current Status of the Secondary Aluminum Alloy Market Increasing Concentration of Secondary Aluminum Alloy Industry Capacity Enterprises are mainly concentrated in east China, south China, and south-west China. Rising Supply Pressure, Slowing Growth in New Secondary Aluminum Alloy Capacity ► SMM Analysis: According to SMM statistics, in 2024, there were 28 planned and newly built secondary cast aluminum alloy projects in China, involving a capacity of 2.05 million mt. Among them, 16 projects were actually put into production, with a new capacity of 1.32 million mt, and the total existing capacity in the industry reached 17.62 million mt. In terms of the distribution of new capacity, Anhui, Sichuan, and Yunnan ranked in the top three. Among them, Anhui, due to its active development of the NEV industry, has attracted many OEMs and parts companies, leading to the establishment of new secondary aluminum plants and potentially shifting the production center in east China from Jiangsu and Zhejiang to Anhui. Surge in New Secondary Aluminum Projects in Q1 2025, Limited Actual Volume ► SMM Analysis: In Q1 2025, the domestic new secondary aluminum capacity totaled 2.66 million mt, including approximately 560,000 mt of new secondary cast aluminum alloy capacity and 1.7 million mt of new secondary wrought aluminum alloy capacity, with secondary wrought aluminum products being favored. Compared to the same period last year, the number of new projects has increased, but most are in the environmental assessment or new construction phase, with limited actual new capacity. As projects are gradually completed and put into production, the supply in the secondary aluminum market is expected to continue to increase significantly. Raw Material Constraints and New Capacity Expansion Lead to Another Decline in Secondary Aluminum Alloy Operating Rate ► SMM Analysis: Due to factors such as high capacity and insufficient raw materials, the overall operating rate in the secondary aluminum industry has remained low for a long time. According to SMM statistics, the production of secondary aluminum alloys in 2024 is expected to reach 7.05 million mt, with the operating rate dropping by 2 percentage points to 40.0% compared to the previous year. The demand for secondary aluminum alloys in fields such as NEVs is expected to increase in the future, and with the gradual improvement of policies, those secondary aluminum plants that rely excessively on tax incentives may face elimination. In addition, the speed of new capacity expansion may slow down, thereby promoting a rebound in the operating rate of the secondary aluminum alloy industry. Significant Increase in NEV Market Share, Secondary Aluminum Alloy Demand Rises ► SMM Analysis: Automobiles are the largest downstream application of secondary aluminum alloys. In 2024, China's automobile production was 31.282 million units, up 3.7% YoY. Among them, the annual production of NEVs exceeded 10 million units for the first time, up 34.4% YoY, with the market share increasing to 40.9%. Although secondary aluminum alloys are currently mainly used in traditional internal combustion engine vehicles, in recent years, automotive parts companies have accelerated the transition from core components of internal combustion engine vehicles to the three electric systems of NEVs, driving secondary aluminum companies to develop aluminum alloy products that meet new demands. Driven by the "dual carbon" goals, cost control, and technological advancements, the demand for low-carbon secondary aluminum materials continues to rise. According to SMM estimates, the demand for secondary aluminum alloys for automobiles in 2024 increased by 2.3% YoY. In Q1 2025, China's automobile production cumulatively reached 7.561 million units, up 14.5% YoY, with NEV production increasing by 50.4%, continuing the strong production and sales momentum. The demand for secondary aluminum alloys for automobiles in 2025 is expected to grow to 4.46 million mt. Steady Growth in the Motorcycle Industry Drives Slight Increase in Secondary Aluminum Alloy Demand ► SMM Analysis: The application of aluminum alloys in motorcycles is already very extensive, with aluminum castings occupying a core position. The main application components include cylinder heads, cylinder blocks, shock absorbers, brakes, handle covers, and side covers. According to data from the China Chamber of Commerce for Motorcycles, the total production of motorcycles in 2024 was 19.9708 million units, up 2.82% YoY. In addition to complete vehicles, the export of motorcycle engines increased by 22% YoY to 1.15 million units. Overall, the demand for secondary aluminum alloys from motorcycles in 2024 increased by 3.4% YoY to 760,000 mt. With policy support, steady growth in exports, and the development of electrification, the demand for secondary aluminum alloys from motorcycles is expected to further increase. Demand for Secondary Aluminum Alloys in Other Fields Also Grows ► SMM Analysis: Secondary aluminum alloys are also widely used in fields such as communications, machinery equipment, consumer electronics, and appliances. ADC12 Cost Breakdown ► SMM Analysis: The cost of ADC12 is mainly composed of five parts. Specifically, ① Aluminum scrap raw material cost: the largest proportion, with differences in composition and yield rate leading to varying aluminum scrap prices. Additionally, the pre-treatment methods and equipment processes of enterprises also affect the cost of aluminum scrap. ② Silicon raw material cost: enterprises mainly use 553# grade with or without oxygen. ③ Copper raw material cost: for cost reduction, secondary aluminum plants usually add bare bright copper wire and other copper scrap. ④ Natural gas cost: secondary aluminum plants mostly use natural gas as fuel in the smelting process, with 60-80 m³ of natural gas consumed per ton of ADC12 production. ⑤ Other costs: mainly include additives and other auxiliary materials used in the smelting process, hydropower, labor, three expenses, and depreciation. Rising Aluminum Prices Drive Up Aluminum Scrap Cost Proportion, Falling Silicon Prices Lead to Significant Decline in Proportion ► SMM Analysis: According to SMM estimates, the national weighted average cost of ADC12 in 2024 was 19,776 yuan/mt (including tax), up 6.9% YoY, with the proportion of aluminum scrap cost increasing by 1.1 percentage points to 88.5%; in 2024, silicon prices continued to decline unilaterally, with the cost proportion continuously decreasing. In Q1 2025, the national weighted average cost of ADC12 reached 20,494 yuan/mt (including tax), with the proportion of aluminum scrap cost increasing by another 0.7 percentage points to 89.2%, continuing to expand in the total cost. Imported Aluminum Alloy Ingots Increased by 7% YoY in 2024, Rebounding Above 1.2 Million mt The import window for aluminum alloy ingots opened after 2020 ► SMM Analysis: Before 2020, China was a net exporter of aluminum alloy ingots, but after 2020, the import window gradually opened. In 2024, imported aluminum alloy ingots were 1.213 million mt, up 7.1% YoY. Policy changes may affect the import situation in 2025. In terms of import sources, Malaysia remained the top source of imported aluminum alloy ingots for the year, reaching 521,300 mt, with the proportion increasing from 42% in 2023 to 43%. The other top sources were Thailand, Vietnam, Russia, and South Korea, with proportions of 14.2%, 7.9%, 7.7%, and 6.1%, respectively. The proportion of the top five import countries increased from 75% in 2023 to 79%.Imports from Thailand saw the largest increase, up 59,000 mt YoY to 172,000 mt. In January-February 2025, aluminum alloy imports exceeded 100,000 mt consecutively, with price inversion and exchange rate impacts leading to shrinking profits. ►SMM Analysis: Cumulative imports in January-February 2025 reached 191,500 mt, down 1.0% YoY. After mid-November last year, domestic aluminum prices began a continuous decline, with ADC12 prices following suit. Meanwhile, overseas prices fluctuated relatively little, and the RMB exchange rate weakened continuously, quickly turning profits into losses, which persisted until mid-January. Additionally, during the Chinese New Year holiday, market activity decreased, and demand declined. Multiple unfavorable factors combined, reducing monthly imports to below 100,000 mt in January and February. Imports in March are expected to rebound slightly to above 100,000 mt, with a potential decline after April. 3. Supply-Demand Balance in the Secondary Aluminum Market. Aluminum Scrap Supply-Demand Balance. Increased imports of aluminum scrap are filling market gaps, potentially balancing aluminum scrap supply and demand. The analysis of the annual aluminum scrap balance (2023-2027E) was conducted from perspectives including domestic new material, domestic old material, imports (aluminum scrap + remelting ingots), secondary aluminum alloy demand, remelting billet demand, secondary aluminum plate/sheet and strip demand, and other demands (cables, aluminum powder, etc.). Secondary Aluminum Alloy Supply-Demand Balance. Slowing capacity release combined with a slight increase in demand maintains a tight balance in the secondary aluminum alloy market. 4. Secondary Aluminum Market Price Outlook and Methodology Introduction. ADC12 Price Trend. ►SMM Analysis: In terms of A00 prices, domestic supply in 2025 is gradually approaching its ceiling, with production growth narrowing to around 2.1%. Meanwhile, the development of new energy and other sectors continues to drive primary aluminum consumption, although traditional construction sector aluminum use is expected to decline. SMM forecasts a 1.5% increase in aluminum consumption for the full year of 2025, maintaining a tight supply-demand balance. Recent unexpected tariff policies have sustained a bearish trading sentiment, putting pressure on future prices. For ADC12, the aluminum scrap market remains tight, and more comprehensive policies may increase cost pressures for companies. Downstream consumption is growing slightly, but the demand rebound in March-April fell short of expectations, intensifying cut-throat competition and dragging down ADC12 prices. On the supply side, new capacities in 2025 continue to expand, increasing supply pressure, while imports may decline, reducing their impact on domestic prices. Overall, aluminum scrap costs still strongly support ADC12 prices, but rising supply and weaker-than-expected demand may limit price increases. SMM strictly adheres to IOSCO price collection standards, facilitating international clients' use of prices. The International Organization of Securities Commissions (IOSCO) is an international cooperative organization of securities and futures regulatory bodies. SMM releases price points through a comprehensive price collection system and price assessment methodology. SMM Secondary Aluminum Price System. SMM secondary aluminum prices cover aluminum scrap and quotes from three major downstream sectors. • Aluminum Scrap: Aluminum scrap prices broadly cover major production and consumption regions in China, involving multiple categories, as well as overseas imports and imported remelting ingot quotes. • Remelting Billet: Covers multiple regions and various models. • Secondary Aluminum Alloy: Common domestic and international alloy grades, such as ADC12, A380, etc. • Secondary Aluminum Plate/Sheet and Strip: Quotes for 1, 3, 5, and 6-series secondary aluminum plate/sheet and strip. SMM ADC12 Price Formation. 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