High raw material prices provide support alongside off-season inventory buildup, secondary aluminium price range under pressure

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Aluminium scrap: This week, China's aluminium scrap market prices consolidated in a narrow range alongside primary aluminium, and the price difference between A00 aluminium and aluminium scrap widened again as aluminium scrap struggled to catch up. On August 13, SMM A00 spot aluminium prices closed at RMB 24,120 per tonne, up RMB 320 per tonne from last Thursday.

In terms of price differences, on August 13, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was about RMB 2,310 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was about RMB 1,210 per tonne, both widening again W-o-W.

Against a backdrop of persistently rising primary aluminium prices, aluminium scrap price fluctuations were relatively limited, and the price transmission mechanism was blocked, mainly constrained by two factors: First, downstream secondary aluminium alloy demand weakened at the margin; with high-temperature holidays combined with the traditional consumption off-season, operating rates at cast aluminium alloy enterprises continued to decline and order volumes shrank.

Second, high inventories of wrought aluminium alloy scrap raw materials such as doors and windows in Henan and other regions weakened the elasticity of aluminium scrap price increases. In addition, supply-side constraints from the “reverse invoicing” policy continued, and the scarcity of compliant, invoice-bearing aluminium scrap provided bottom support for aluminium scrap prices.

Import side, this week, imported shredded aluminium zorba prices at Ningbo port were lowered from RMB 21,970 per tonne to RMB 21,770 per tonne (tax-inclusive), while those at Tianjin port declined from RMB 22,020 per tonne to RMB 21,820 per tonne (tax-inclusive). Recently, the import window improved compared with earlier, traders' inquiries and buying interest increased, and cargoes are expected to arrive gradually in mid-to-late August, which should improve import supply in the short term.

At present, high-temperature holidays have not yet ended; downstream cast aluminium alloy enterprises are maintaining low operating rates, and order recovery still needs time. Scrap utilisation enterprises are likely to continue their purchase-as-needed, low-inventory strategy, while a concentrated restocking cycle still needs to wait.

Notably, the price difference between A00 aluminium and shredded aluminium tense scrap has now widened to RMB 1,210 per tonne, and aluminium scrap's cost advantage over primary aluminium has recovered somewhat. In the short term, the aluminium scrap market is expected to continue moving sideways at high levels, with weak end-use demand remaining the core factor weighing on prices.

Secondary aluminium alloy:

This week, ADC12 prices rose first and then fell, edging up to RMB 24,400 per tonne early in the week, then pulling back to RMB 24,200 per tonne in the middle-to-late part of the week. The overall price centre was little changed W-o-W. Cost side, aluminium scrap prices moved sideways overall this week, and production costs changed little.

However, aluminium scrap prices remained at relatively high levels, providing support for ADC12 prices and limiting downside room. At the same time, policy uncertainty persisted, compliant aluminium scrap purchases remained restricted, and enterprises still faced high difficulty in procuring raw materials.

Demand side, downstream remained in the consumption off-season; some enterprises were on high-temperature holidays or maintained reduced-load production. End-use consumption was weak, market purchases were mainly need-based, and spot transactions were sluggish.

Supply side, operating rates among leading secondary aluminium enterprises showed mixed performance this week, edging lower overall and remaining at low levels for the same period. In addition to raw material constraints and weakening demand, high temperatures, typhoons, and heavy rain also disrupted production to some extent, limiting production release.

Social inventory showed a phased inflection point, as China's cast aluminium alloy ingot social inventory was 25,500 tonnes this week, up 1,500 tonnes W-o-W, ending ten consecutive weeks of destocking. On one hand, weak off-season demand put warehouse withdrawals under pressure; on the other hand, the spot-futures price spread weakened and futures stayed in contango, so spot-futures arbitrage traders became more willing to buy on dips, shifting some cargoes from the spot market to social inventory.

Import side, overseas ADC12 offers rose to USD 3,090-3,120 per tonne, and immediate import losses widened again to more than RMB 1,000 per tonne, with the import window remaining closed. ADC12 prices are expected to continue moving sideways in the short term.

On one hand, elevated compliant raw material prices, low domestic operating rates for the same period, and the closed import window will continue to provide cost and supply-side support for prices, limiting downside room; on the other hand, weak end-use demand during the high-temperature off-season and renewed social inventory buildup mean the spot market lacks demand-driven momentum for sustained price increases. Therefore, any short-term price rise still needs to wait for a substantial improvement in end-use consumption.

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.