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 and 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 - Old Scrap Experiences Explosive Growth in Recent Years • SMM Analysis: The factors influencing old aluminum scrap are numerous. Currently, the recycling of old aluminum scrap mainly comes from social old scrap with an average lifespan of 10-20 years, involving fields such as construction, transportation, power, packaging, and durable goods. Among these, construction and transportation dominate. In recent years, with more aluminum scrap gradually entering the recycling cycle and policies like "trade-in" being introduced, old scrap is in a phase of explosive growth. • New aluminum scrap primarily comes from aluminum and downstream rolling and casting processes, including off-cuts and defective products. Additionally, some scrap from end-use industries during usage is also high-quality aluminum scrap. This portion of aluminum scrap is mainly influenced by the annual aluminum consumption. Supply Side - Raw Material Imports Supplement Increasing Year by Year Since the implementation of the new standard in 2020, with traders' increasing adaptation to the new standard, aluminum scrap imports have been recovering year by year. • SMM Analysis: In 2018, other aluminum scrap (760200090) was adjusted to the "Catalog of Restricted Imports of Solid Waste Usable 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. • 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 took effect from 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 Transition from Regulation 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 importing secondary aluminum raw materials in China, providing a policy basis for legal and compliant imports. SMM expects aluminum scrap imports to show restorative growth in 2025. However, with the growth of domestic old and new scrap production, domestic aluminum scrap supply will play a significant role, reducing reliance on overseas aluminum scrap. In addition to the increase in domestic aluminum scrap supply, overseas secondary aluminum processing capacity has also been growing in recent years, with overseas aluminum scrap resources entering a period of high growth demand. 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, Plate/Sheet and Extrusions Become New Engines • SMM Analysis: The downstream demand for aluminum scrap in China is mainly for producing secondary aluminum alloys, manufacturing remelting billets for aluminum extrusions, and adding 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, leading to a tight supply of aluminum scrap. 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, while the demand for secondary wrought alloys has been increasing year by year, continuing to drive the overall demand growth in the 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 reached 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 start of the "14th Five-Year Plan," China's secondary aluminum industry has entered a policy golden period, with relevant policies being intensively introduced, accelerating the national low-carbon process, promoting carbon peaking 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 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. Supply Pressure Rises, Growth Rate of New Secondary Aluminum Alloy Capacity Slows • 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, adding 1.32 million mt of capacity, bringing the total industry capacity to 17.62 million mt. • From the perspective of the distribution of new capacity, Anhui, Sichuan, and Yunnan ranked in the top three. 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. Q1 2025 Sees a Surge in New Secondary Aluminum Projects, but Actual Volume is Limited • SMM Analysis: In Q1 2025, the domestic new secondary aluminum capacity totaled 2.66 million mt, including about 560,000 mt of new secondary cast aluminum alloy capacity and about 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, new projects have increased, but most are in the environmental assessment or new construction phase, with limited actual new capacity. As projects gradually complete and start 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: Constrained by high capacity and insufficient raw materials, the overall operating rate of 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 2 percentage points YoY to 40.0%. • 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 overly reliant on tax incentives may face elimination. Additionally, 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: The automotive industry is the largest downstream application for secondary aluminum alloys. In 2024, China's automotive production was 31.282 million units, up 3.7% YoY. Among them, NEV production 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 mainly used in traditional internal combustion engine vehicles, in recent years, automotive parts companies have accelerated their 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 alloy materials continues to rise. According to SMM estimates, the demand for secondary aluminum alloys in the automotive industry in 2024 increased by 2.3% YoY. • In Q1 2025, China's automotive 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. In 2025, the demand for secondary aluminum alloys in the automotive industry 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: Aluminum alloys are widely used in motorcycles, with aluminum castings occupying a core position. Main application components include cylinder heads, cylinder blocks, shock absorbers, brakes, handle covers, and side covers. • According to data from the China Motorcycle Chamber of Commerce, the motorcycle industry produced 19.9708 million units in 2024, up 2.82% YoY. In addition to complete vehicles, motorcycle engine exports increased by 22% YoY to 1.15 million units. Overall, the demand for secondary aluminum alloys in the motorcycle industry 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 in the motorcycle industry 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 communication, machinery equipment, consumer electronics, and appliances. ADC12 Cost Breakdown • SMM Analysis: ADC12 costs are 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 pretreatment methods and equipment processes of enterprises also affect aluminum scrap costs. ② Silicon raw material cost: enterprises mainly use oxygen-blown or non-oxygen-blown #553 grades. 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, Silicon Prices Decline Significantly • 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 costs rising by 1.1 percentage points to 88.5%; silicon prices continued to decline in 2024, with the cost proportion decreasing. • In Q1 2025, the national weighted average cost of ADC12 reached 20,494 yuan/mt (including tax), with the proportion of aluminum scrap costs rising by 0.7 percentage points to 89.2%, continuing to expand in the total cost. 2024 Aluminum Alloy Ingot Imports Increase by 7%, Rebounding Above 1.2 Million mt After 2020, the import window for aluminum alloy ingots opened. • SMM Analysis: Before 2020, China was a net exporter of aluminum alloy ingots, but after 2020, the import window gradually opened. In 2024, aluminum alloy ingot imports were 1.213 million mt, up 7.1% YoY. Policy changes may affect the 2025 import situation. • In terms of import sources, Malaysia remained the top source for aluminum alloy ingots throughout the year, with 521,300 mt, accounting for 43% of total imports, up from 42% in 2023. Other top sources were Thailand, Vietnam, Russia, and South Korea, accounting for 14.2%, 7.9%, 7.7%, and 6.1%, respectively. The top five import countries accounted for 79% of total imports, up from 75% in 2023.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 from January to February 2025 reached 191,500 mt, down 1.0% YoY. After mid-November last year, domestic aluminum prices began a continuous decline, and ADC12 prices followed suit. Meanwhile, overseas prices fluctuated relatively small, and the RMB exchange rate weakened continuously, quickly turning the previously profitable state into losses, which persisted until mid-January. Additionally, during the Chinese New Year holiday, market trading activity decreased, and demand reduced. Multiple unfavorable factors combined, leading to monthly imports in January and February shrinking to below 100,000 mt. 3. Supply-demand balance in the secondary aluminum market. Aluminum scrap supply-demand balance. Increased imports of aluminum scrap supplement market gaps, and aluminum scrap supply and demand may tend to balance. The annual balance of aluminum scrap (2023-2027E) was analyzed from perspectives including domestic new scrap, domestic old scrap, 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 slight demand increase 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 ADC12, the aluminum scrap market supply remains tight, and more comprehensive policies may lead to increased cost-side pressure for enterprises. Demand side, downstream consumption maintains a slight increase, but the demand rebound in March-April fell short of expectations, intensifying industry cut-throat competition and dragging down ADC12 prices. Supply side, new capacity in 2025 continues to increase, raising supply pressure; imports may decline, weakening the impact on domestic prices. Overall, aluminum scrap costs still strongly support ADC12 prices, but rising supply and demand falling short of expectations 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 composed of international 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 basically cover major production and consumption regions of domestic aluminum scrap, involving multiple categories, as well as overseas imports and imported remelting ingots quotes. • Remelting billet: Covers multiple regions and various models. • Secondary aluminum alloy: Common domestic and international aluminum 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. Formation of SMM ADC12 prices. Click to view the AICE 2025 SMM (20th) Aluminum Industry Conference and Aluminum Industry Expo special report.