SMM, July 13:
SMM spot A00 aluminum prices closed at 23,000 yuan/mt today, down 120 yuan/mt MoM from the previous trading day. The aluminum scrap market broadly tracked the decline, with prices for some categories in certain regions stabilizing on a wait-and-see sentiment. Supply-side constraints continued to intensify, and the impact of the reverse invoicing policy deepened further. Reports emerged from Shandong about the suspension of reverse invoicing starting in July, while production cuts and shutdowns among small and medium-sized scrap utilization enterprises spread in Anhui, Jiangxi, Hubei, and other regions, further tightening the scarcity of compliant, invoiced aluminum scrap. On the import front, a low volume of port arrivals from June to August persisted due to a 1-3 month shipping lag following the earlier inversion of price spreads between Chinese and overseas markets, which had made high-quality overseas supply scarce. Meanwhile, the UAE's export ban on aluminum scrap and the EU's tariff hikes further tightened the overseas aluminum scrap supply.
This week, the aluminum scrap market is expected to continue its narrow, sideways movement pattern, pressured by demand but supported by costs, with shredded aluminum tense scrap (priced based on aluminum content) mainly trading in a range around 19,900-20,500 yuan/mt. The pullback in spot primary aluminum prices limited the extent to which the price difference between A00 aluminum and aluminum scrap could narrow again, suggesting the cost advantage of aluminum scrap over primary aluminum is unlikely to disappear in the short term and that demand-side price support remains. Should aluminum prices continue to decline further, the substitution effect of primary aluminum for aluminum scrap will accelerate.
