Cost-driven price strength, heatwave holidays drag demand, ADC12 gains capped [Aluminum Scrap and Secondary Aluminum Weekly Review]

Aluminum Scrap:

This week, the aluminum scrap market continued to consolidate at highs. On July 30, SMM A00 spot aluminum prices closed at 23,630 yuan/mt, up 370 yuan/mt WoW from last Thursday. Regarding the price difference between A00 aluminum and aluminum scrap, on July 30, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was approximately 2,070 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was approximately 860 yuan/mt. On the import side, this week, the price of imported zorba at Ningbo port was lowered from 21,770 yuan/mt to 21,570 yuan/mt (including tax), and at Tianjin port from 21,820 yuan/mt to 21,620 yuan/mt (including tax). Overseas aluminum scrap prices: On July 27, Malaysian baled UBC was recorded at 10,175 ringgit/mt, up 225 ringgit/mt WoW from the previous quoting day; Thailand Talon was recorded at 109,500 baht/mt, down 500 baht/mt WoW from the previous quoting day. Against the backdrop of the consumption off-season, scrap suppliers' willingness to sell at low prices was generally low, and aluminum scrap prices remained firm overall. On the demand side, as high-temperature holidays approached, operating rates at downstream cast aluminum alloy enterprises declined and orders shrank; operating rates at secondary aluminum plate/sheet and strip enterprises were moderate, but overall raw material demand support significantly weakened compared to Q2. In the short term, the tight supply of compliant invoiced cargo persisted, and suppliers' reluctance to sell at low prices provided bottom support for prices. On the import side, the lagged effects of the UAE export ban and the EU tariff hike policy will gradually emerge in the coming months, with port arrivals remaining low, June-August. On the demand side, the sluggish downstream orders are unlikely to improve in the short term. Scrap utilization enterprises will likely continue purchasing as needed and maintaining low inventory, with little significant improvement in procurement sentiment.

Secondary Aluminum Alloy:

This week, the ADC12 market showed a pattern of stabilizing first and then rising. At the start of the week, SMM ADC12 prices held steady at 24,000 yuan/mt, but were raised for two consecutive days mid-week driven by costs, closing at 24,200 yuan/mt as of Thursday, up 200 yuan/mt WoW from last Thursday. The cost side remained the core driver of this week's price rise. During the week, primary aluminum prices continued to strengthen, driving up aluminum scrap procurement costs simultaneously. Combined with tight supply of compliant aluminum scrap, enterprises' raw material costs further increased. Most producers raised their quotes accordingly to pass on cost pressure. However, the cost increase exceeded the selling price increase, and theoretical profit for ADC12 continued to narrow, with ongoing significant pressure on operations. Demand remained weak. Since July, the traditional off-season deepened, and with high-temperature holidays approaching, downstream enterprises' operating rates declined and orders shrank, keeping market activity low. The current price rise relied more on cost pass-through, with end-user purchasing mainly for essential needs. Insufficient demand limited further upside room for prices. Supply side, this week, the operating rate of secondary aluminum industry leaders fell 1.4 percentage points WoW to 49.4%, a low for the same period, mainly constrained by tax invoice issues, deepening off-season, and high-temperature holidays. Social inventory of domestic cast aluminum alloy ingots achieved a ninth consecutive weekly decline, with this week's figure at 24,300 mt, down 1,600 mt WoW. However, the rate of decline slowed down, and warehouse withdrawal momentum weakened. On the import side, overseas ADC12 offers maintained at $3,050-3,160/mt. As domestic prices rose, immediate import losses narrowed to around 600 yuan/mt, and trader inquiry enthusiasm improved somewhat. If the price spread between Chinese and overseas markets further recovers, import resources may gradually supplement the Chinese market. In the short term, the ADC12 market will continue its pattern of "cost support and demand constraint." Cost side, primary aluminum prices hold up well and aluminum scrap supply remains tight, continuing to provide strong support. Demand side, the traditional consumption off-season has not ended, and high-temperature holidays still impact downstream operating rates and procurement pace. An improvement in end-use demand is expected to await the start of the traditional peak season from mid-to-late August to September. Until then, ADC12 prices are expected to continue consolidating at highs. Going forward, focus remains on primary aluminum price trends, the recovery pace of downstream orders, and the sustained impact of tax invoice policy changes on industry supply. If end-use demand sees a seasonal recovery in late August while industry compliance costs and tight tax invoice conditions remain unresolved, the supply-demand pattern is expected to tighten further, potentially providing more solid upside support for ADC12 prices.