Secondary Aluminum Raw Materials:This week, domestic aluminum scrap prices followed primary aluminum's sharp rally, with the price center rising significantly. As of January 8, the SMM A00 aluminum price closed at 24,000 yuan/mt, up 1,540 yuan/mt from before the holiday. Major categories of aluminum scrap moved in sync, with baled UBC trading in the range of 17,700-18,100 yuan/mt (ex-tax) and shredded aluminum tense scrap (water price) at 19,300-19,800 yuan/mt (ex-tax), up 800-1,400 yuan/mt cumulatively over the week. Regional price adjustments diverged, with Shanghai, Zhejiang, and Shandong seeing the largest cumulative gains, while increases in Guizhou, Henan, and Hunan were relatively modest. Supply side, environmental protection-driven production restrictions in central China were lifted, but inventory levels for wrought aluminum scrap remained saturated. Demand side, the "price without market" characteristic became prominent, as downstream users strongly resisted high prices, purchasing as needed or digesting inventories. Some enterprises planned early shutdowns, and Chinese New Year stocking expectations weakened. For the price difference between primary metal and scrap, Foshan aluminum for profiles closed at 3,766 yuan/mt, and shredded aluminum tense scrap closed at 2,691 yuan/mt. Aluminum scrap market is expected to hover at highs next week, with shredded aluminum tense scrap (water price) projected in the main range of 18,800-19,200 yuan/mt (ex-tax). High primary aluminum prices will provide bottom support for scrap, but poor cost transmission along the industry chain will limit upside room. Inventory pressure on the supply side and the fragmented scrap sourcing landscape are unlikely to change significantly in the short term. Downstream suppression is intensifying; as the Chinese New Year approaches, enterprises are gradually entering holiday shutdowns. The operating rate of secondary aluminum producers will decline further, downstream production cuts and shutdowns will expand, and stocking demand is unlikely to provide effective support. Overall, the tug-of-war between sellers and buyers continues. Close attention should be paid to primary aluminum trends, downstream shutdown progress, and pre-holiday transaction activity, while remaining vigilant against high-price correction risks.
Secondary Aluminum Alloy:The secondary aluminum market rose then fell this week. On the futures market, the most-traded cast aluminum alloy 2603 contract was driven by strong long position building early in the week, breaking out with a large bullish candlestick and continuing to rise, hitting a new record high since listing of 23,490 yuan/mt. However, the trend reversed on Thursday, with prices retreating sharply. The spot market also surged; the SMM ADC12 price rose sharply by 1,250 yuan/mt during the week to 23,700 yuan/mt, a new high since October 2021. Cost side, persistently strong primary aluminum and copper prices, which hit new multi-year highs, drove up the cost of recycled aluminum raw materials, becoming the core driver of the earlier ADC12 price jump. However, as the increase in finished alloy ingot prices outpaced that of raw materials, industry profit margins improved somewhat, and cost support correspondingly loosened. Demand side, fear of high prices was evident among downstream users. Downstream enterprises generally turned to digesting inventories, postponing purchases, or only maintaining essential needs, with some even planning early shutdowns. Overall market transactions were sluggish. The rapid rise in aluminum prices has led to poor cost transmission along the industry chain, increased downstream production cuts and shutdowns, and coupled with weakening pre-Chinese New Year stocking expectations, market vitality is significantly suppressed. Supply side, the operating rate in the secondary aluminum industry continued to decline. Repeated environmental protection-related controls in some regions constrained production, and combined with weakening downstream demand, enterprise orders and production fell simultaneously. On imports, overseas ADC12 offers rose to $2,800-2,840/mt, but the increase was smaller than domestically. The immediate profitability of imports continued to improve, theoretically opening the import arbitrage window. Overall, the tug-of-war between bulls and shorts in the secondary aluminum market intensified. Cost and tight supply still provide bottom support for prices, but weak demand and resistance to high prices pose significant downward pressure. As macro tailwinds are gradually digested and demand remains weak, ADC12 prices are expected to end their unilateral rise in the near term, shifting to fluctuating at highs and facing further correction pressure.
