Cost Push and Weak Demand: Secondary Aluminum Alloy Market Faces a "Dilemma" [Weekly Review of Aluminum Scrap and Secondary Aluminum]

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Secondary Aluminum Raw Materials:

This week, aluminum scrap market prices remained generally stable. As of Thursday, the SMM A00 spot price was 19,980 yuan/mt, up 180 yuan/mt WoW. Overall aluminum scrap prices were basically stable, but there was significant differentiation among varieties. Baled UBC prices rose by 100 yuan/mt to 15,000-15,600 yuan/mt (tax excluded), reflecting a slight recovery in demand for low-grade aluminum scrap. Aluminum tense scrap products such as shredded aluminum tense scrap and wheel hubs removed from vehicles remained at high levels due to tight supply. Prices in Hunan, Hubei, Foshan, and Jiangxi remained firm, without significant adjustments following primary aluminum price changes. In east China and central China (Shanghai, Jiangsu, Henan, Anhui), prices closely followed the fluctuations of primary aluminum. On the demand side, downstream scrap utilization enterprises operated at low rates, with the peak season nearing its end, leading to a marginal decline in orders. Raw material procurement remained rigid. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference for mechanical casting aluminum scrap in Shanghai increased by 45 yuan/mt WoW to 1,861 yuan/mt. The price difference for aluminum extrusion scrap in Foshan rose by 22 yuan/mt WoW to 1,648 yuan/mt, indicating that aluminum scrap prices remained relatively stable compared to primary aluminum. Next week, the aluminum scrap market is likely to continue fluctuating at highs, with limited overall price fluctuations but continued differentiation among varieties: aluminum tense scrap prices are expected to remain stable at high levels, with ongoing attention to supply-side changes; baled UBC prices will follow primary aluminum fluctuations, with changes of 50-100 yuan/mt. If primary aluminum experiences significant fluctuations due to macro factors (such as US Fed policies or geopolitical conflicts) or if domestic secondary aluminum enterprises collectively cut production, aluminum scrap prices may face periodic pressure.

Secondary Aluminum Alloy:

This week, the center of aluminum prices slightly increased, while secondary aluminum alloy prices remained stable, with SMM ADC12 prices staying in the range of 20,500-20,700 yuan/mt. Cost side, the easing of trade war tensions led to a general recovery in non-ferrous metals this week, with rising aluminum scrap and copper prices pushing up ADC12 production costs. Although silicon prices continued to decline, the drop in silicon raw material costs was far less than the increase in aluminum scrap and copper prices. Against the backdrop of overall rising raw material costs and a lack of upward support for finished product prices, the secondary aluminum alloy industry fell into a loss-making situation. On the demand side, aluminum prices stabilized and rebounded during the week, but downstream enterprises' purchase willingness remained weak, with no improvement in demand. Both domestic market and export orders experienced varying degrees of decline. As the Labour Day holiday approaches, some die-casting enterprises are expected to stockpile before the holiday, potentially improving market transactions next week, but low visibility of terminal orders limits the intensity of stockpiling. Supply side, due to persistently weak demand, secondary aluminum plants generally faced difficulties in shipments and pressure from finished product inventories. Some secondary aluminum plants reduced their operating levels, leading to a downward trend in the overall industry operating rate. In the short term, secondary aluminum alloy prices are expected to fluctuate rangebound, with weak demand and high inventories limiting upward potential, while high aluminum scrap costs provide bottom support. Subsequent focus will be on pre-holiday stockpiling trends and macro environment changes.