Weak demand, tight scrap supply deepen secondary aluminium losses

Aluminium scrap: China's aluminium scrap market swung wildly this week following primary aluminium. As of May 7, SMM A00 aluminium price closed at RMB 24,050 per tonne, down RMB 340 per tonne W-o-W from pre-holiday levels. Shredded aluminium tense scrap (delivered price) mainly operated in the range of RMB 20,500-21,100 per tonne (tax exclusive). Imported shredded aluminium slices (Ningbo Port) operated in the range of RMB 21,570-21,870 per tonne (tax inclusive). In terms of price spread, on May 7, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was recorded at RMB 2,478 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,833 per tonne.

Supply side, affected by the Labour Day holiday, most aluminium scrap yards arranged 1-2 days off, and the shipment pace of aluminium scrap collection and delivery remained generally stable compared to April. After the holiday, raw material prices swung wildly, and aluminium scrap yards generally held back from selling and held prices firm; high overseas market prices led import traders to adopt cautious strategies, and subsequent imports are expected to pull back. Demand side, the traditional off-season set in, the operating rate of secondary aluminium producers pulled back slightly, aluminium tense scrap purchasers purchased as needed and operated with low inventory, and cooked aluminium was supported by secondary aluminium plate/sheet and strip production but with limited strength. Downstream demand was mainly rigid, with strong wait-and-see sentiment. The aluminium scrap market is expected to remain in the doldrums at high levels next week, with shredded aluminium tense scrap (delivered price) maintaining a mainstream range of RMB 20,500-21,300 per tonne (tax exclusive). Supply side, policy constraints are unlikely to ease in the short term, and tight compliant supply combined with expected pullback in imports will provide some price support. Demand side, the off-season effect continues, downstream secondary aluminium enterprises remain cautious and wait-and-see, purchasing mainly through small rigid-demand orders to restock. The divergence between aluminium tense scrap and cooked aluminium remains unchanged, order growth is limited, and market risks from aluminium price fluctuations and tight supply still warrant vigilance.

Secondary aluminium alloy: This week, affected by the Labour Day holiday, China's secondary aluminium alloy market saw overall subdued trading activity, with the ADC12 price centre continuing to shift downward. As of Thursday, the SMM ADC12 price was quoted at RMB 23,500 per tonne, down RMB 300 per tonne W-o-W. Cost side, aluminium scrap prices pulled back along with aluminium prices during the week, but actual declines in aluminium scrap were relatively limited, supported by suppliers' sentiment to hold back from selling at low prices. Meanwhile, alloy ingot prices fell more than raw material prices. Combined with persistently tight compliant aluminium scrap resources and procurement costs staying high, the industry's theoretical profit-loss shifted from profit to loss, significantly increasing cost pressure on enterprises. Demand side, the weak pattern continued. After entering May, the industry gradually entered the traditional consumption off-season. Downstream enterprises generally adopted a cautious wait-and-see attitude toward the market outlook, with purchases mainly driven by rigid demand and small-order restocking. Purchase willingness remained low, and market transaction activity was insufficient. In terms of supply, the operating rate of leading enterprises in the secondary aluminium industry declined 0.7 percentage points W-o-W to 57.0 per cent. Although major plants maintained normal production during the holiday, enterprises compressed their production pace due to some downstream enterprises being on holiday and reduced orders, resulting in the operating rate pulling back slightly. After the holiday effect dissipates next week, the operating rate is expected to recover slightly, but demand off-season conditions and cost pressure are unlikely to improve significantly in the short term, and the industry's overall operating rate still faces downward expectations. Inventory side, as of this Thursday, social inventory of secondary aluminium alloy ingots in China's major consumption areas was 57,200 tonnes, up 400 tonnes W-o-W, marking the fourth consecutive week of inventory buildup, reflecting slow spot cargo warehouse withdrawals amid weak demand and continued transfer from factory inventory to social inventory. Overall, the current traditional consumption off-season characteristics are gradually emerging, with insufficient downstream purchase willingness and continued social inventory accumulation. Market fundamentals remained in the doldrums. Although aluminium scrap prices softened somewhat, declines on the raw material side were limited, supported by tight supply sources and sentiment to hold back from selling, providing certain cost support for ADC12 prices. However, the market lacked clear positive drivers, and ADC12 prices are expected to maintain a fluctuating trend on the weak side next week.

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.