Cost support battles weak demand; short-term ADC12 prices move sideways

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Aluminium scrap: This week, the aluminium scrap market stayed high while moving sideways, with overall limited price fluctuations. On July 23, SMM A00 spot aluminium prices closed at RMB 23,260 per tonne, up slightly by RMB 90 per tonne W-o-W.

Regarding the price spread between primary aluminium and scrap, on July 23, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was approximately RMB 2,100 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap in Foshan was approximately RMB 780 per tonne, both remaining at historical lows.

In terms of imports, according to customs data, China's aluminium scrap imports in June 2026 totalled approximately 132,800 tonnes, down M-o-M from 152,000 tonnes in May, marking the third consecutive monthly decline. From the cumulative data for 2026, total aluminium scrap imports from January to June were approximately 981,800 tonnes.

Orders from Southeast Asia in the Guangdong region increased, and the import window improved slightly, but new transactions still primarily involved low-priced resources, with overall spot market trading activity remaining limited. Affected by the UAE's aluminium scrap export ban and the EU's tariff hike policy, the shrinkage effect on high-quality aluminium scrap import sources will further manifest in the future.

Next week, the aluminium scrap market is expected to continue a narrow sideways pattern, suppressed by demand and supported by costs. Against the backdrop of deepening off-season, downstream end-user orders are unlikely to see substantial improvement, and scrap utilisation enterprises continue to purchase as needed, with the purchasing atmosphere unlikely to improve significantly.

The mainstream operating range for shredded aluminium tense scrap (priced based on aluminium content) is expected to be at RMB 19,800-20,400 per tonne. Currently, the price spread between primary aluminium and scrap has narrowed to a historical low, significantly weakening the economic advantage of aluminium scrap relative to primary aluminium.

If primary aluminium prices continue to decline subsequently, while aluminium scrap remains resilient supported by tight supply, the price spread between primary aluminium and scrap will face the risk of further narrowing, and the substitution effect of primary aluminium for scrap will accelerate. Close attention should be paid to changes in primary aluminium prices and the price spread between primary aluminium and scrap, as well as the crowding-out effect of primary aluminium substitution on aluminium scrap demand.

Secondary aluminium alloy: This week, ADC12 prices continued to fluctuate narrowly. As of today, the SMM ADC12 quotation was adjusted down by RMB 100 per tonne from last Thursday to RMB 24,000 per tonne. During the week, cost support from aluminium scrap remained, and enterprises showed limited willingness to cut prices proactively; however, constrained by weak off-season demand, upward price momentum was also lacking, and the market overall exhibited a bargaining pattern of "holding prices firm for shipments and closing deals based on orders."

On the cost side, primary aluminium prices edged up this week, driving aluminium scrap prices to follow. Meanwhile, there is no sign of easing in the tax invoice policy, and the supply of compliant aluminium scrap remains tight, with short-term cost support for ADC12 prices staying solid. On the demand side, the traditional consumption off-season has deepened further, downstream order releases have been limited, and market transaction activity has been sluggish.

The demand side's boost to price increases is clearly insufficient, and short-term demand improvement remains limited. The market still needs to wait for the growth support from the recovery of peak season orders.

On the supply side, the operating rate of industry leaders in the secondary aluminium sector fell by 0.4 percentage points W-o-W to 50.8 per cent this week, at a lower level for the same period in recent years. Insufficient tax invoices and the demand off-season jointly suppressed enterprise production enthusiasm.

In terms of inventory, social inventory of cast aluminium alloy ingots in China dropped to 25,900 tonnes, down by 3,800 tonnes W-o-W, marking eight consecutive weeks of destocking, with a cumulative destocking of 37,000 tonnes.

However, as demand remained weak, the pace of inventory decline further slowed from earlier periods, with the current situation more reflecting limited new arrivals due to low operating rates and continuous shipments from spot and futures traders jointly driving destocking. In terms of imports, overseas ADC12 quotations further pulled back to USD 3,050-USD 3,160 per tonne, while domestic prices remained relatively firm supported by costs.

The price spread between Chinese and overseas markets has continued to repair, and import losses have narrowed to within RMB 1,000 per tonne, with the import window improving slightly from earlier, but short-term import growth is expected to remain limited. Overall, short-term ADC12 prices will continue to move sideways.

On the cost side, tight aluminium scrap supply and tax invoice policies continue to build a price bottom, and enterprises hold firm in their willingness to maintain prices; however, weak off-season demand and slow recovery of end-user orders will continue to suppress upside room. Moving forward, close attention should be paid to primary aluminium price trends, changes in tax invoice policies, aluminium scrap circulation, and the pace of peak season order recovery.

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.