Cost support strengthens demand awaits recovery ADC12 price consolidates at highs

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Aluminium scrap:

This week, the aluminium scrap market held up with a consolidation on a strong note. As of August 27, the SMM A00 spot aluminium price closed at RMB 23,920 per tonne, up RMB 320 per tonne from last Thursday. In terms of the price difference between A00 aluminium and aluminium scrap, on August 27, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,394 per tonne and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,173 per tonne, remaining stable W-o-W.

Against the backdrop of a sustained rebound in primary aluminium  prices, aluminium  scrap fluctuations were relatively limited, and the price transmission mechanism was impeded, constrained by two main factors: first, the traditional peak season is about to arrive, but downstream secondary aluminium  alloy demand has not shown significant improvement; second, high inventory of wrought aluminium  raw materials such as doors and windows in Henan and other places weakened the upside elasticity of aluminium  scrap prices.

Moreover, the supply-side policy constraints of "reverse invoicing" continued, and the scarcity of compliant, invoiced aluminium scrap provided bottom support for aluminium scrap prices. On the import front, this week, the price of imported shredded zorba at Ningbo Port was lowered from RMB 21,670 per tonne to RMB 21,370 per tonne (tax included), and that at Tianjin Port was reduced from RMB 21,720 per tonne to RMB 21,420 per tonne (tax included).

The import window improved recently compared to before, traders' inquiry and procurement enthusiasm increased, and import supply rose. In the short term, currently at the end of the traditional off-season, orders for downstream scrap utilization enterprises have not yet shown a significant recovery, and the early effects of the peak season are not significant.

Scrap utilisation enterprises continued their strategy of purchasing as needed and maintaining low inventory, with limited acceptance of price increases. Some enterprises chose to temporarily hold steady and observe after following the price increases earlier. On the import side, the gradual arrival of previously traded resources supplemented supply to some extent, but the deep-seated effects of the UAE ban and EU tariff increases will still limit the release of high-quality scrap imports.

Secondary aluminium alloy:

This week, the ADC12 market price moved sideways to higher in a narrow range. The SMM ADC12 price was raised by RMB 50 per tonne from RMB 23,900 per tonne at the beginning of the week to RMB 23,950 per tonne. Cost side, this week aluminium prices held up well, and aluminium scrap raw material prices remained at a relatively high level. The cost increase led some enterprises to tentatively raise their quotes, strengthening cost support for prices and also squeezing the downside room.

Demand side, the market is still in the traditional consumption off-season, end-use demand is generally weak, and downstream die-casting enterprises still mainly purchase on a rigid demand basis. The improvement in transactions is limited, and acceptance of price increases is insufficient. However, as the traditional peak season approaches, some enterprises have reported signs of marginal improvement in recent orders, and market expectations for subsequent demand recovery have risen somewhat. If orders from major downstream sectors such as automobiles and motorcycles further recover, restocking demand is expected to gradually release.

Supply side, this week the operating rate of industry-leading secondary aluminium enterprises rebounded slightly by 1.1 percentage points to 50.3 per cent. Marginal demand improvement led to a recovery in production for some enterprises, but the overall operating rate remained at a relatively low level. Social inventory side, this week China's cast aluminium alloy ingot social inventory increased to 31,800 tonnes, up 3,700 tonnes W-o-W, marking the third consecutive week of inventory buildup.

This reflects that end-user absorption capacity remains weak, and purchases by spot-futures merchants also added to inventory. Ex-China ADC12 quotes were temporarily stable at USD 3,050-3,180 per tonne, and the real-time import loss remained around RMB 900 per tonne.

The import window stays closed, and overseas supply is temporarily unable to effectively supplement domestic supply. Looking ahead, in the short term, ADC12 prices are expected to continue a trend of high-level narrow-range consolidation, with the centre gradually moving up.

Cost support remains, and downside room is limited; however, the demand side has not yet formed a clear upward driver, and an upside breakthrough requires the substantial cooperation of peak season orders. In the short term, focus on aluminium price trends, changes in aluminium scrap raw material costs, and the fulfilment of peak season demand.

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.