Post-holiday secondary aluminum market sees mild recovery [SMM Analysis]

This week, the domestic aluminum scrap market overall showed a pattern of "rising prices but sluggish trading volume." As of February 26, the SMM A00 aluminum price closed at 23,520 yuan/mt, up 170 yuan/mt from before the holiday. Mainstream categories of aluminum scrap saw slight increases in sync: baled UBC closed at 17,000–17,500 yuan/mt (tax excluded), and shredded aluminum tense scrap (water price) closed at 19,200–19,900 yuan/mt (tax excluded). In terms of the price difference between primary metal and scrap, on February 26, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,448 yuan/mt, while the price difference between A00 aluminum and shredded aluminum tense scrap was 2,661 yuan/mt.  

Supply side, after the holiday, most scrap yards resumed operations between the eighth and tenth day of the lunar new year. Supply release remained tight, compounded by recycling policy constraints, with strict checks on reverse invoicing limiting the liquidity of aluminum scrap. Demand side recovery lagged; downstream aluminum processing enterprises saw stockpiling volumes decrease YoY, and large-scale restocking actions were postponed. Secondary aluminum enterprises mainly engaged in just-in-time procurement and digesting inventories. Market transactions continued sluggish, highlighting a weak supply-demand dynamic.  

Next week, the aluminum scrap market is expected to hover at highs, with shredded aluminum tense scrap (water price) mainly trading in the range of 19,000–19,600 yuan/mt (tax excluded). Supply side, scrap yards will gradually resume full operations, and supply release is expected to increase somewhat, but recycling policy constraints on liquidity will persist. Demand side, downstream enterprises will accelerate their pace of resuming work, and restocking demand is expected to be released slowly. Overall, the tug-of-war between sellers and buyers will continue; market trading atmosphere will gradually recover but remain relatively sluggish. Close attention should be paid to the progress of downstream work resumption, primary aluminum price trends, and changes in recycling policies, while staying alert to price fluctuation risks. 

The secondary aluminum alloy market showed a mild recovery overall in the first week after the holiday. Price-wise, the most-traded aluminum alloy contract rose from around 22,000 yuan/mt to the 22,700 yuan/mt level, while spot SMM ADC12 increased by 150 yuan/mt from pre-holiday levels to 23,800 yuan/mt. Demand side, end-use industries resumed work in an orderly manner, market inquiries gradually recovered, and trading activity picked up, though actual transaction volumes remained limited. Downstream enterprises mainly focused on restocking for rigid demand and digesting pre-holiday inventory. Entering March, as end-users fully resume operations, demand is expected to improve MoM with greater certainty, and consumption will continue to rebound. Supply side, the operating rate of leading secondary aluminum enterprises rose 6.3 percentage points WoW from the pre-holiday week to 53.1%, mainly driven by concentrated post-holiday production resumptions. Most enterprises resumed work between the eighth and fifteenth days of the first lunar month, starting with equipment maintenance and furnace preheating. Although this boosted the operating rate MoM, actual production had not yet returned to pre-holiday normal levels. After the Lantern Festival, as enterprises fully resume production, market supply is expected to gradually increase. Against a backdrop of relatively stable raw material supply and moderate industry profits, if primary aluminum prices hold up well, production enthusiasm is likely to remain, and supply pressure will increase marginally. However, potential impacts of policy changes on the production pace of enterprises in Anhui and other regions still need monitoring. Import side, overseas ADC12 offers were raised consecutively to the $2,900–2,950/mt range, but due to a stronger yuan, import arbitrage remained profitable, and the import window stayed open. Overall, ADC12 prices are expected to move sideways in the short term, but as demand gradually recovers, the price fluctuation center may continue to rise. Before full production resumptions are realized, slow supply release coupled with cost support will limit downside room. As enterprises fully resume production, market focus will shift to the actual fulfillment of end-use consumption. If end-user orders see phased increases and primary aluminum remains strong, ADC12 prices may have further room to rise; otherwise, if demand recovery falls short of expectations, prices may continue their current sideways consolidation pattern.