Aluminium Scrap: This week, the domestic aluminium scrap market generally faced upward pressure, with the price centre moving higher WoW. Spot primary aluminium prices initially rose and then fell. As of July 24, the SMM A00 price closed at RMB 20,720 per tonne, up RMB 150 per tonne from Thursday last week.
Downstream scrap utilisation enterprises, constrained by weak orders during the traditional off-season, maintained just-in-time procurement, resulting in sluggish market transactions. There was significant differentiation among aluminium scrap varieties: shredded aluminium tense scrap demonstrated strong resilience against price drops due to ongoing supply shortages, with weekly quotes remaining stable at RMB 15,800-17,400 per tonne (tax-exclusive); baled UBC followed aluminium price fluctuations, with the price centre moving higher, cumulatively rising RMB 150 per tonne to RMB 15,350-15,850 per tonne (tax-exclusive).
Regional performance differences were prominent: east China (Shanghai, Jiangsu, Shandong) closely tracked aluminium prices, with daily adjustments reaching up to RMB 100 per tonne; while in Guizhou, Hunan and other places, price adjustments lagged due to fear of high prices, with quotes mostly remaining flat.
The price difference between primary metal and scrap continued to narrow, with the price spread of aluminium profiles in Foshan narrowing by RMB 92 per tonne to RMB 1,864 per tonne during the week, reflecting weakened support for aluminium scrap relative to primary aluminium. It is expected that the aluminium scrap market will continue to be in a weak oscillatory pattern next week, with the price centre returning to off-season levels.
The bearish outlook for primary aluminium has not dissipated, coupled with the continued suppression of weak off-season demand, limiting the overall upside potential for aluminium scrap. However, the tight supply of raw materials still provides medium and long-term bottom support.
The differentiation pattern among varieties will continue: shredded aluminium tense scrap, supported by supply shortages, will demonstrate strong price resilience, fluctuating rangebound within RMB 15,600-17,200 per tonne (tax-exclusive); baled UBC, due to weak end-use demand, will face significant downward pressure, with prices possibly dropping to RMB 15,000-15,500 per tonne (tax-exclusive).
Secondary Aluminium Alloy: This week, the most-traded contract of cast aluminium alloy futures initially jumped and then pulled back, reaching a new post-listing high of RMB 20,350 per tonne on Wednesday before slightly declining, closing at RMB 20,135 per tonne on Thursday.
On the spot market, ADC12 prices initially rose and then fell. As of July 24, the SMM ADC12 price was reported at RMB 20,100 per tonne, up RMB 100 per tonne WoW, with the theoretical premium against the most-traded contract narrowing to RMB 110 per tonne.
On the cost side, the continuous rise in aluminium prices drove up the production cost of ADC12 due to the increase in aluminium scrap prices. Tight supply led to high procurement prices, significantly supporting secondary aluminium prices and limiting the room for price corrections. Silicon costs also rose simultaneously.
Stimulated by macroeconomic and policy factors, the main contract of silicon metal futures reached a three-month high. The price of oxygen-blown #553 silicon rose by RMB 750 per tonne WoW, pushing up the silicon cost of ADC12. However, secondary aluminium plants mainly focused on just-in-time procurement or digesting inventories, resulting in limited actual impact. After mid-July, demand-side performance continued to be weak.
Downstream industries gradually entered high-temperature holidays, and weak end-use consumption led to low market acceptance of high prices, constraining the upside potential of spot prices.
On the supply side, due to declining demand and difficulties in raw material restocking, the industry's operating rate continued to decline. Inventory showed structural differentiation: enterprise finished product inventories rapidly decreased due to reduced operating rates and quick delivery of futures and spot orders, leading to reluctance to budge on prices amid tight supply; while social inventory accelerated its accumulation, reaching 32,555 tonnes (a weekly increase of 2,257 tonnes) in major consumption areas on July 24.
Warehouses in Wuxi and Ningbo in east China were full, with continuous inflows in Chongqing and Foshan. The current weakening of the spot-futures price spread, coupled with the off-season demand, put pressure on futures and spot traders to sell.
Overall, cost support will continue to limit the downside potential of prices, while high social inventory and persistently weak actual demand will suppress the upside potential of prices. It is expected that the ADC12 price will maintain a narrow oscillatory pattern in the short term.
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.
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