[SMM Analysis] High Costs & Weak Demand to Pressure Secondary Aluminum Operating Rate in January

According to the SMM survey, the operating rate of the secondary aluminum industry in December 2025 fell 2.3 percentage points MoM to 44.1%, but increased 1.3 percentage points YoY.

The weakening operating rate that month was mainly constrained by the following factors: first, demand weakened after mid-month, with aluminum prices hitting record highs exacerbating downstream fear of high prices, suppressing procurement and putting production under pressure; second, tight raw material supply and high costs eroded profits, as aluminum scrap supply continued to tighten toward the year-end, and rising aluminum and copper prices drove aluminum scrap prices to follow quickly, leaving enterprises facing procurement difficulties and cost pressure; third, environmental protection-related controls in many regions led to production restrictions or halts at some enterprises, compounded by unclear details on fiscal subsidies in some provinces, causing continued shutdowns at some firms and dragging on the recovery of operating rates.

Since January, market demand has continued to weaken, and rapid rises in aluminum prices have hindered cost pass-through. Under operational pressure, production cuts and shutdowns have increased downstream. As the Chinese New Year approaches, market expectations for stockpiling have cooled significantly. If aluminum prices continue to fluctuate at highs, the production and sales pace in the secondary aluminum industry may slow down further. The industry's operating rate in January is expected to show a clear pullback.