Secondary aluminium raw materials: The domestic aluminium scrap market fluctuated in tandem with primary aluminium this week, with the price center hovering at highs. As of December 18, the SMM A00 aluminium price closed at RMB 21,730 per tonne, down RMB 160 per tonne W-o-W.
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Major categories of aluminium scrap followed the adjustment, with shredded aluminium tense scrap (including freight) quoted at RMB 18,000-18,550 per tonne (ex-tax) and baled UBC at RMB 16,250-16,750 per tonne (ex-tax). On one hand, some secondary aluminium alloy scrap utilisation enterprises reported that they are expected to begin Chinese New Year stockpiling soon and are currently conducting concentrated procurement of aluminium scrap raw materials, thus accelerating the procurement pace for aluminium tense scrap.
However, repeated environmental protection-driven production restrictions in regions such as Chongqing, Henan, and Hebei affected the operating rates of scrap utilisation enterprises, leading to a slight weakening in downstream aluminium scrap demand.
On the other hand, imported and domestic aluminium scrap raw materials remained tight, traders maintained low inventory levels, and the slight dip in aluminium prices at the beginning of the week prompted some aluminium scrap suppliers to hold prices firm and be reluctant to sell.
Downstream alloy enterprises reported difficulty in sourcing low-priced raw materials. Regarding the price difference between primary metal and scrap, the price difference between A00 aluminium and shredded aluminium tense scrap closed at RMB 1,924 per tonne on December 18, while the price difference for bare bright aluminium wire in Jiangsu was RMB 901.9 per tonne.
The aluminium scrap market is expected to continue fluctuating at highs next week, with the mainstream range for shredded aluminium tense scrap (including freight) projected at RMB 18,000-18,500 per tonne (ex-tax). The tight supply situation for aluminium scrap is difficult to change in the short term, and shortages of imported raw materials are providing a floor for prices.
Pre-Chinese New Year stockpiling is about to begin, with concentrated raw material procurement by some scrap utilisation enterprises, offering some support for scrap demand. However, repeated environmental protection-driven production restrictions in central and south-west China mean market participants remain cautious.
Overall, the tug-of-war between sellers and buyers in the aluminium scrap market is expected to continue next week. Close attention should be paid to fluctuations in primary aluminium prices, the implementation of environmental protection-driven production restrictions, and changes in the procurement pace of downstream enterprises, while remaining vigilant against the risk of a high-level correction.
Secondary aluminium alloy: The secondary aluminium alloy market generally maintained a pattern of high volatility this week. In the futures market, the most-traded cast aluminium alloy contract first declined then rose, mainly fluctuating around the RMB 21,000 per tonne level during the week. In the spot market, as of today, the SMM ADC12 price was quoted at RMB 21,650 per tonne, cumulatively down RMB 100 per tonne from last Friday. Cost is the core support for the current ADC12 price.
Although the A00 aluminium price showed volatile movements, first declining then rising during the week, aluminium scrap prices demonstrated significant resistance to decline due to persistently tight supply: traders held prices firm and were reluctant to sell when aluminium prices fell, but quickly followed price increases during rebounds.
This kept production costs for secondary aluminium plants persistently high, thereby supporting the firm ADC12 price. The theoretical profit/loss for the ADC12 industry has now rebounded above the break-even line, with profitability improving compared to the previous period. On the demand side, new orders from downstream die-casting enterprises showed weakness.
Although there is some year-end demand for periodic volume pushes, signs of an overall demand slowdown are gradually becoming apparent. Coupled with sharp fluctuations in aluminium prices, downstream procurement has become more cautious, mostly purchasing as needed, leading to generally average overall market transactions. Supply side, the operating rate of leading enterprises in the secondary aluminium industry remained stable at 59.8 per cent this week, with orders and production at large plants remaining relatively stable.
However, environmental protection-related controls were reinstated in Chongqing, suppressing the recovery of local enterprises' operating rates. On the inventory side, according to SMM statistics, the social inventory of secondary aluminium alloy ingots in mainstream domestic consumption areas was 53,400 tonnes on December 18, a decrease of 1,256 tonnes from last Thursday, continuing a slight destocking trend.
ADC12 prices are expected to continue fluctuating at high levels in the short term, with limited room for both increases and decreases. Support below comes from the rigid cost floor provided by tight aluminium scrap supply, while pressure above stems from marginally weakening demand and the wait-and-see sentiment among downstream players triggered by aluminium price volatility.
Subsequent attention should focus on raw material availability, regional environmental protection policies, and changes in downstream orders.
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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