Operating rate declines notably due to holiday; ADC12 price expected to remain strong after the holiday [Weekly Review of Aluminum Scrap and Secondary Aluminum]

Aluminum scrap:

This week, the aluminum scrap market price center moved slightly lower along with primary aluminum. As of September 30, SMM A00 aluminum prices closed at 24,030 yuan/mt, down 190 yuan/mt from last Thursday, with aluminum scrap prices broadly following the decline. In terms of price spreads, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at about 2,550 yuan/mt, while the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,384 yuan/mt. On the import side, imported shredded aluminum zorba prices at Ningbo Port and Tianjin Port were recorded at 21,470 yuan/mt and 21,520 yuan/mt respectively (tax inclusive). After the National Day holiday, the aluminum scrap market continued to hold up well. On the supply side, scrap yards will gradually resume operations after a brief 3-5 day holiday, with material release expected to increase somewhat, but recycling policy constraints on liquidity remain, and the tight invoice supply situation is unlikely to ease in the short term. Tight supply will continue to support prices. On the demand side, as the traditional peak consumption season for cast aluminum alloy gradually kicks in, enterprises are accelerating their order-taking and procurement pace. Under the dual-tight supply-demand situation, price support for aluminum tense scrap is expected to strengthen further. Demand for wrought aluminum alloy remains moderate, with relatively ample in-factory inventory, but under tax audit restrictions, aluminum scrap supply is expected to decline, and the price uptrend channel will gradually open up. However, at present, peak-season demand release remains relatively mild, and actual post-holiday order fulfillment still needs close monitoring.

Secondary aluminum alloy:

This week, ADC12 prices remained broadly stable, with SMM ADC12 prices holding steady at 24,500 yuan/mt during the week. On the cost side, aluminum prices and cast aluminum futures weakened somewhat, but aluminum scrap prices saw limited declines. Combined with stricter enforcement of tax invoice policies, compliant raw material supply remained tight and procurement costs stayed high. The cost side provided strong support for spot prices, and enterprises had little willingness to cut prices proactively. On the demand side, with the National Day holiday approaching, downstream pre-holiday stockpiling was generally cautious, with procurement still mainly need-based. Although some pre-holiday restocking demand was released, it did not form a significant concentrated volume, and high procurement costs also constrained downstream purchasing enthusiasm to some extent. On the supply side, the operating rate of leading secondary aluminum enterprises fell 7.6 percentage points WoW to 45.6% this week, mainly affected by some sample enterprises suspending production for 3 days during the National Day holiday. Overall holiday days for enterprises increased this year. Tight raw material supply, high procurement costs, stricter tax invoice compliance requirements, and downstream clients' holiday schedules all constrained production. Some enterprises adjusted by reducing loads, conducting maintenance, or extending holidays. On the inventory side, as of September 30, SMM cast aluminum alloy social inventory was recorded at 31,300 mt, down 500 mt WoW, marking a second consecutive week of destocking. Pre-holiday stockpiling helped absorb some inventory, but with shipments slowing during the holiday and some enterprises temporarily halting production, there is a possibility of a slight post-holiday inventory rebound. In the short term, enterprises will gradually resume production after the holiday, and the supply side will progressively recover. However, against the backdrop of stricter tax invoice policies, the difficulty of procuring compliant aluminum scrap may still constrain production release. The demand side is the key factor determining post-holiday price elasticity. If end-use orders improve and post-holiday restocking demand is released, marginal supply-demand improvement is expected to support prices. Conversely, if demand recovery falls short of expectations, upward momentum for spot prices will remain limited. Overall, post-holiday ADC12 prices are expected to maintain a certain resilience supported by costs, consolidating on a strong note in the short term. Future price elasticity will depend more on changes in tax invoice policies, raw material costs, and actual end-use demand.