Falling costs coupled with off-season double inventory buildup, adc12 consolidates on a subdued note

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Aluminium scrap:

This week, domestic aluminium scrap prices in China followed the primary aluminium pullback, showing a pattern of high-level weakness. However, cost support remained, limiting the decline. On August 20, SMM A00 spot aluminium ingot prices closed at RMB 23,600 per tonne, down RMB 520 per tonne from RMB 24,120 per tonne last Thursday.

Dragged down by the fall in primary aluminium  prices, aluminium  scrap prices pulled back, but thanks to cost support and tight supply, the decline in scrap was relatively limited, maintaining its resilience. In terms of price spreads, on August 20, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 2,360 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,150 per tonne.

Domestically, the impact of the reverse invoicing policy deepened, with compliant invoiced aluminium scrap scarcity rising continuously, constraining the operating rates and procurement of scrap utilisation enterprises. On imports and exports, according to SMM customs data, China's aluminium scrap imports in July 2026 totalled approximately 119,600 tonnes, down M-o-M from 133,000 tonnes in June, mainly due to the inverted price spread between Chinese and overseas markets and shipment delays, keeping the supplement of high-quality overseas scrap at a low level.

Affected by the UAE's aluminium scrap export ban and the EU's tariff hike policy, the contraction effect of supply from Europe and the Middle East continued to show, further consolidating Southeast Asia's position as a major supplementary source. Next week, the aluminium scrap market is expected to continue its narrow sideways movement pattern under demand suppression and cost support.

Currently, the traditional off-season is nearing its end, with no substantial breakout in downstream end-user orders. Scrap utilisation enterprises continue to adopt a purchase-as-needed strategy with cautious procurement sentiment, and the pre-peak season effect is not yet apparent. Enterprises need to wait and see for subsequent order intake. The mainstream operating range for shredded aluminium tense scrap (priced based on aluminium content) is expected to be between 19,900 and RMB 20,700 per tonne.

Secondary aluminium alloy:

This week, ADC12 prices rose first and then fell, stabilising later. Today, SMM ADC12 fell RMB 300 per tonne from last Thursday to RMB 23,900 per tonne. On the cost side, aluminium scrap prices followed aluminium prices down, but compliant raw material costs remained at a relatively high level. Among cost components, copper and silicon prices edged up, and overall production costs were slightly lower than before.

However, as selling prices fell faster than costs, the industry's theoretical losses widened slightly. On the demand side, it is still the hot off-season, with weak end-user orders and downstream mainly making just-in-time procurement. Prices fell during the week but did not trigger concentrated dip-buying downstream, and market restocking willingness remained weak.

Some secondary aluminium enterprises, affected by sluggish shipments, saw a buildup in finished product inventories, increasing their willingness to sell at lower prices, putting downward pressure on prices. With the hot weather gradually easing, demand is expected to improve marginally.

On the supply side, this week's operating rate of industry leaders in secondary aluminium remained stable at 49.1 per cent, still at a low level for the period. China's social inventory of cast aluminium alloy ingots rose to 28,100 tonnes, up 2,500 tonnes M-o-M, marking the second consecutive week of inventory buildup, with the pace of buildup accelerating. Under weak off-season demand, inventory pressure further emerged.

On imports, overseas ADC12 quotes fell to USD 3,050-3,190 per tonne, with the immediate import loss remaining around RMB 1,000 per tonne. The import window remained closed, and overseas supply supplement was limited. Looking ahead, ADC12 prices are expected to consolidate on a subdued note in the near term. On the cost side, high compliant raw material costs, the closed import window, and low operating rates form a floor for prices, limiting downside room.

However, weak end-use consumption, insufficient downstream purchase willingness, and the simultaneous buildup of enterprise finished product and social inventories leave prices lacking upward momentum. Should the hot off-season end and end-user orders improve substantially, prices could regain upward momentum.

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.