Raw Material Constraints and Weak Demand Kept Secondary Aluminum Operating Rates Low in July [SMM Analysis]

July 2026 Survey Data on Operating Rates of Secondary Aluminum Alloy Enterprises by Region and Scale: 

According to SMM survey statistics, the operating rate of the secondary aluminum industry in July 2026 edged up 1.4 percentage points MoM to 34.6%, but declined 7.0 percentage points YoY. In July, operating rates among secondary aluminum alloy enterprises showed mixed performance, with the overall industry seeing a slight recovery from low levels.

Raw material side, the shortage of compliant aluminum scrap and invoices remained the core constraint on production. Many enterprises faced invoice and material shortages due to tight supply of invoiced domestic goods or inverted import aluminum scrap prices, controlling output through production cuts, periodic halts, or reducing low-processing-fee orders. Although some regions saw marginal policy easing, limited invoice quotas provided weak support for operating rates. Meanwhile, in early July, the A00-ADC12 spread widened, prompting some enterprises to increase purchases of A00 aluminum ingot to replace scrap, which lent some support to production, but the overall increase was modest due to high costs and limited substitution scale.

Demand side, orders were generally moderate in July, but weakened marginally in late July due to high temperatures and downstream holiday-related production cuts. According to CAAM data, auto production and sales in July reached 2.573 million and 2.584 million units, down 6.8% and 8% MoM, and down 0.7% and 0.3% YoY, respectively. The auto market entered the traditional off-season in July, with foot traffic and orders naturally pulling back. Coupled with the pre-release of some demand from the semi-annual sales push, persistent nationwide high temperatures, and the impact of typhoons and floods in some regions on offline sales, the overall performance showed a seasonal MoM pullback.

Overall, the industry made significant production cuts in May-June, leaving limited room for further output compression. Meanwhile, some enterprises saw improvements in raw material supply and orders, driving a slight rebound in the overall July operating rate from low levels, though it remained notably weak on a YoY basis. Entering August, secondary aluminum alloy production is expected to remain largely stable at low levels, with insufficient basis for large-scale production increases. Raw material side, the tightness of compliant scrap and invoice issues are unlikely to improve fundamentally in the short term; although policies have eased marginally in some regions, the effect on overall supply improvement is limited. Demand side, early August is still in the high-temperature off-season, but later in the month as the high-temperature holidays end, auto-related orders are expected to drive marginal demand improvement. The August industry operating rate is anticipated to change little from July. Some enterprises with improved raw material supply or better orders may have room for modest output recovery, but the industry as a whole will still operate at low, stable levels.