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Secondary aluminium raw materials: This week, domestic aluminium scrap prices followed primary aluminium's sharp rally, with the price centre rising significantly. As of January 8, the SMM A00 aluminium price closed at RMB 24,000 per tonne, up RMB 1,540 per tonne from before the holiday. Major categories of aluminium scrap moved in sync, with baled UBC trading in the range of RMB 17,700-18,100 per tonne (ex-tax) and shredded aluminium tense scrap (water price) at RMB 19,300-19,800 per tonne (ex-tax), up RMB 800-1,400 per tonne cumulatively over the week. Regional price adjustments diverged, with Shanghai, Zhejiang, and Shandong seeing the largest cumulative gains, while increases in Guizhou, Henan, and Hunan were relatively modest. Supply side, environmental protection-driven production restrictions in central China were lifted, but inventory levels for wrought aluminium scrap remained saturated. Demand side, the "price without market" characteristic became prominent, as downstream users strongly resisted high prices, purchasing as needed or digesting inventories. Some enterprises planned early shutdowns, and Chinese New Year stocking expectations weakened. For the price difference between primary metal and scrap, Foshan aluminium for profiles closed at RMB 3,766 per tonne, and shredded aluminium tense scrap closed at RMB 2,691 per tonne. Aluminium scrap market is expected to hover at highs next week, with shredded aluminium tense scrap (water price) projected in the main range of RMB 18,800-19,200 per tonne (ex-tax). High primary aluminium prices will provide bottom support for scrap, but poor cost transmission along the industry chain will limit upside room. Inventory pressure on the supply side and the fragmented scrap sourcing landscape are unlikely to change significantly in the short term. Downstream suppression is intensifying; as the Chinese New Year approaches, enterprises are gradually entering holiday shutdowns. The operating rate of secondary aluminium producers will decline further, downstream production cuts and shutdowns will expand, and stocking demand is unlikely to provide effective support. Overall, the tug-of-war between sellers and buyers continues. Close attention should be paid to primary aluminium trends, downstream shutdown progress, and pre-holiday transaction activity, while remaining vigilant against high-price correction risks.

Secondary aluminium alloy: The secondary aluminium market rose then fell this week. On the futures market, the most-traded cast aluminium alloy 2603 contract was driven by strong long position building early in the week, breaking out with a large bullish candlestick and continuing to rise, hitting a new record high since listing of RMB 23,490 per tonne. However, the trend reversed on Thursday, with prices retreating sharply. The spot market also surged; the SMM ADC12 price rose sharply by RMB 1,250 per tonne during the week to RMB 23,700 per tonne, a new high since October 2021. Cost side, persistently strong primary aluminium and copper prices, which hit new multi-year highs, drove up the cost of recycled aluminium raw materials, becoming the core driver of the earlier ADC12 price jump. However, as the increase in finished alloy ingot prices outpaced that of raw materials, industry profit margins improved somewhat, and cost support correspondingly loosened. Demand side, fear of high prices was evident among downstream users. Downstream enterprises generally turned to digesting inventories, postponing purchases, or only maintaining essential needs, with some even planning early shutdowns. Overall market transactions were sluggish. The rapid rise in aluminium prices has led to poor cost transmission along the industry chain, increased downstream production cuts and shutdowns, and coupled with weakening pre-Chinese New Year stocking expectations, market vitality is significantly suppressed. Supply side, the operating rate in the secondary aluminium industry continued to decline. Repeated environmental protection-related controls in some regions constrained production, and combined with weakening downstream demand, enterprise orders and production fell simultaneously. On imports, overseas ADC12 offers rose to USD 2,800-2,840 per tonne, but the increase was smaller than domestically. The immediate profitability of imports continued to improve, theoretically opening the import arbitrage window. Overall, the tug-of-war between bulls and shorts in the secondary aluminium market intensified. Cost and tight supply still provide bottom support for prices, but weak demand and resistance to high prices pose significant downward pressure. As macro tailwinds are gradually digested and demand remains weak, ADC12 prices are expected to end their unilateral rise in the near term, shifting to fluctuating at highs and facing further correction pressure.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.