Cost Support Strengthens, Demand Awaits Recovery ADC12 Price Consolidates at Highs [Aluminum Scrap and Secondary Aluminum Weekly Review]

Aluminum Scrap:

This week, the aluminum scrap market held up with a consolidation on a strong note. As of August 27, the SMM A00 spot aluminum price closed at 23,920 yuan/mt, up 320 yuan/mt from last Thursday. In terms of the price difference between A00 aluminum and aluminum scrap, on August 27, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,394 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,173 yuan/mt, remaining stable WoW. Against the backdrop of a sustained rebound in primary aluminum prices, aluminum scrap fluctuations were relatively limited, and the price transmission mechanism was impeded, constrained by two main factors: first, the traditional peak season is about to arrive, but downstream secondary aluminum alloy demand has not shown significant improvement; second, high inventory of wrought aluminum raw materials such as doors and windows in Henan and other places weakened the upside elasticity of aluminum scrap prices. Moreover, the supply-side policy constraints of "reverse invoicing" continued, and the scarcity of compliant, invoiced aluminum scrap provided bottom support for aluminum scrap prices. On the import front, this week, the price of imported shredded zorba at Ningbo Port was lowered from 21,670 yuan/mt to 21,370 yuan/mt (tax included), and that at Tianjin Port was reduced from 21,720 yuan/mt to 21,420 yuan/mt (tax included). The import window improved recently compared to before, traders' inquiry and procurement enthusiasm increased, and import supply rose. In the short term, currently at the end of the traditional off-season, orders for downstream scrap utilization enterprises have not yet shown a significant recovery, and the early effects of the peak season are not significant. Scrap utilization enterprises continued their strategy of purchasing as needed and maintaining low inventory, with limited acceptance of price increases. Some enterprises chose to temporarily hold steady and observe after following the price increases earlier. On the import side, the gradual arrival of previously traded resources supplemented supply to some extent, but the deep-seated effects of the UAE ban and EU tariff increases will still limit the release of high-quality scrap imports.

Secondary Aluminum Alloy:

This week, the ADC12 market price moved sideways to higher in a narrow range. The SMM ADC12 price was raised by 50 yuan/mt from 23,900 yuan/mt at the beginning of the week to 23,950 yuan/mt. Cost side, this week aluminum prices held up well, and aluminum scrap raw material prices remained at a relatively high level. The cost increase led some enterprises to tentatively raise their quotes, strengthening cost support for prices and also squeezing the downside room. Demand side, the market is still in the traditional consumption off-season, end-use demand is generally weak, and downstream die-casting enterprises still mainly purchase on a rigid demand basis. The improvement in transactions is limited, and acceptance of price increases is insufficient. However, as the traditional peak season approaches, some enterprises have reported signs of marginal improvement in recent orders, and market expectations for subsequent demand recovery have risen somewhat. If orders from major downstream sectors such as automobiles and motorcycles further recover, restocking demand is expected to gradually release. Supply side, this week the operating rate of industry-leading secondary aluminum enterprises rebounded slightly by 1.1 percentage points to 50.3%. Marginal demand improvement led to a recovery in production for some enterprises, but the overall operating rate remained at a relatively low level. Social inventory side, this week China's cast aluminum alloy ingot social inventory increased to 31,800 mt, up 3,700 mt WoW, marking the third consecutive week of inventory buildup. This reflects that end-user absorption capacity remains weak, and purchases by spot-futures merchants also added to inventory. Ex-China ADC12 quotes were temporarily stable at $3,050-3,180/mt, and the real-time import loss remained around 900 yuan/mt. The import window stays closed, and overseas supply is temporarily unable to effectively supplement domestic supply. Looking ahead, in the short term, ADC12 prices are expected to continue a trend of high-level narrow-range consolidation, with the center gradually moving up. Cost support remains, and downside room is limited; however, the demand side has not yet formed a clear upward driver, and an upside breakthrough requires the substantial cooperation of peak season orders. In the short term, focus on aluminum price trends, changes in aluminum scrap raw material costs, and the fulfillment of peak season demand.