Weak Demand Tight Scrap Supply Deepen Secondary Aluminum Losses[Weekly Review of Aluminum Scrap and Secondary Aluminum]

Aluminum scrap: China's aluminum scrap market swung wildly this week following primary aluminum. As of May 7, SMM A00 aluminum price closed at 24,050 yuan/mt, down 340 yuan/mt WoW from pre-holiday levels. Shredded aluminum tense scrap (delivered price) mainly operated in the range of 20,500-21,100 yuan/mt (tax exclusive). Imported shredded aluminum slices (Ningbo Port) operated in the range of 21,570-21,870 yuan/mt (tax inclusive). In terms of price spread, on May 7, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,478 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,833 yuan/mt. Supply side, affected by the Labour Day holiday, most aluminum scrap yards arranged 1-2 days off, and the shipment pace of aluminum scrap collection and delivery remained generally stable compared to April. After the holiday, raw material prices swung wildly, and aluminum scrap yards generally held back from selling and held prices firm; high overseas market prices led import traders to adopt cautious strategies, and subsequent imports are expected to pull back. Demand side, the traditional off-season set in, the operating rate of secondary aluminum producers pulled back slightly, aluminum tense scrap purchasers purchased as needed and operated with low inventory, and cooked aluminum was supported by secondary aluminum plate/sheet and strip production but with limited strength. Downstream demand was mainly rigid, with strong wait-and-see sentiment. The aluminum scrap market is expected to remain in the doldrums at high levels next week, with shredded aluminum tense scrap (delivered price) maintaining a mainstream range of 20,500-21,300 yuan/mt (tax exclusive). Supply side, policy constraints are unlikely to ease in the short term, and tight compliant supply combined with expected pullback in imports will provide some price support. Demand side, the off-season effect continues, downstream secondary aluminum enterprises remain cautious and wait-and-see, purchasing mainly through small rigid-demand orders to restock. The divergence between aluminum tense scrap and cooked aluminum remains unchanged, order growth is limited, and market risks from aluminum price fluctuations and tight supply still warrant vigilance. 

Secondary aluminum alloy: This week, affected by the Labour Day holiday, China's secondary aluminum alloy market saw overall subdued trading activity, with the ADC12 price center continuing to shift downward. As of Thursday, the SMM ADC12 price was quoted at 23,500 yuan/mt, down 300 yuan/mt WoW. Cost side, aluminum scrap prices pulled back along with aluminum prices during the week, but actual declines in aluminum scrap were relatively limited, supported by suppliers' sentiment to hold back from selling at low prices. Meanwhile, alloy ingot prices fell more than raw material prices. Combined with persistently tight compliant aluminum scrap resources and procurement costs staying high, the industry's theoretical profit-loss shifted from profit to loss, significantly increasing cost pressure on enterprises. Demand side, the weak pattern continued. After entering May, the industry gradually entered the traditional consumption off-season. Downstream enterprises generally adopted a cautious wait-and-see attitude toward the market outlook, with purchases mainly driven by rigid demand and small-order restocking. Purchase willingness remained low, and market transaction activity was insufficient. In terms of supply, the operating rate of leading enterprises in the secondary aluminum industry declined 0.7 percentage points WoW to 57.0%. Although major plants maintained normal production during the holiday, enterprises compressed their production pace due to some downstream enterprises being on holiday and reduced orders, resulting in the operating rate pulling back slightly. After the holiday effect dissipates next week, the operating rate is expected to recover slightly, but demand off-season conditions and cost pressure are unlikely to improve significantly in the short term, and the industry's overall operating rate still faces downward expectations. Inventory side, as of this Thursday, social inventory of secondary aluminum alloy ingots in China's major consumption areas was 57,200 mt, up 400 mt WoW, marking the fourth consecutive week of inventory buildup, reflecting slow spot cargo warehouse withdrawals amid weak demand and continued transfer from factory inventory to social inventory. Overall, the current traditional consumption off-season characteristics are gradually emerging, with insufficient downstream purchase willingness and continued social inventory accumulation. Market fundamentals remained in the doldrums. Although aluminum scrap prices softened somewhat, declines on the raw material side were limited, supported by tight supply sources and sentiment to hold back from selling, providing certain cost support for ADC12 prices. However, the market lacked clear positive drivers, and ADC12 prices are expected to maintain a fluctuating trend on the weak side next week.