Aluminum Prices in December See Expanded Decline; High Costs Make ADC12 Prices More Likely to Rise Than Fall [SMM Analysis]

SMM, January 7: In December, aluminum prices saw a downward shift in the price center. As of December 31, the most-traded SHFE aluminum 2502 contract closed at 19,780 yuan/mt. In the spot market, on December 31, the SMM A00 price dropped by 590 yuan/mt from the end of the previous month to 19,770 yuan/mt. The average spot price of SMM aluminum for December (calendar month) was recorded at 20,080 yuan/mt, down 3.7% MoM. Meanwhile, ADC12 prices generally followed the upward trend but not the downward trend, even rising against the market, shifting from a slight discount to a premium against A00 prices. As of January 7, quotes from large domestic secondary aluminum enterprises remained stable MoM at 20,500-20,800 yuan/mt, while prices from small and medium-sized plants rose by 100 yuan/mt MoM to 20,200-20,400 yuan/mt. The chart below shows the recent price trends and price spreads of A00 and ADC12: Cost side, the tight supply of aluminum scrap in December did not ease but instead worsened. The undersupply led to a slower decline in aluminum scrap prices, especially aluminum tense scrap prices, significantly narrowing the price difference between primary metal and scrap. To meet order demands, secondary aluminum plants actively procured during the month and stockpiled in advance in November and December to prepare for production during the Chinese New Year, particularly considering that aluminum scrap traders might gradually halt operations after the New Year’s Day holiday. However, due to insufficient market supply and the continuous decline in aluminum prices, aluminum scrap traders held back cargoes, making procurement more challenging for secondary aluminum plants. The chart below shows the price difference between primary metal and scrap: Silicon side, silicon prices showed a slight weakening trend in December. As of January 7, the price of above-standard #553 silicon metal fell by 450 yuan/mt MoM to 11,150 yuan/mt. With relatively ample supply recently, spot silicon metal prices are expected to remain at low levels, with minimal impact from silicon costs on ADC12 cost side. The chart below shows the price trends of silicon and aluminum: Overall, the weighted average cost of the ADC12 industry in December decreased by 1.1% compared to November. The costs of major raw materials such as aluminum scrap, silicon, and copper all declined, leading to a slight recovery in theoretical profitability for the industry. However, the actual decline in costs, especially aluminum scrap costs, was limited, and cost factors remain the main support for the firm ADC12 prices. The chart below shows the average profit of ADC12 nationwide this year: Demand side, orders for secondary aluminum in December showed no significant changes, remaining stable compared to November. The automotive market in December continued the high momentum seen since Q3, with the effects of scrappage and renewal policies persisting. Supported by year-end consumption from automakers and other end-users, demand for secondary aluminum plants, especially large ones, remained relatively stable, with even some order increases. However, due to insufficient raw material supply, manufacturers were cautious in taking orders, focusing mainly on fulfilling long-term contracts or orders from long-established customers. Finished product inventories at secondary aluminum enterprises were generally low, and manufacturers actively procured low-cost cargoes from traders to replenish inventories or fulfill orders. Entering January, downstream orders for secondary aluminum plants are expected to decline significantly due to the Chinese New Year holiday and the advance placement of orders. Supply side, the operating rate of the secondary aluminum alloy industry in December decreased by 1.08 percentage points MoM to 53.96%, ending a three-month upward trend and down 4.8% YoY. Downstream demand in December remained largely unchanged, with the main factors disrupting production at secondary aluminum plants being raw material shortages and environmental protection-driven production restrictions. Domestic and overseas aluminum scrap circulation continued to tighten in December, with most secondary aluminum plants facing material shortages or losses on production, making it difficult to increase operating rates. Additionally, environmental protection inspections or orange alerts were successively implemented in regions such as Henan, Sichuan and Chongqing, and Jiangsu, further reducing operating rates at local secondary aluminum plants. Entering January, except for secondary aluminum plants supplying molten aluminum directly, most enterprises are expected to begin a 5-20 day Chinese New Year holiday around mid-January, leading to a significant decline in the industry's operating rate. Imports, according to customs data, the import volume of unwrought aluminum alloy in November 2024 was 102,000 mt, down 8.8% YoY and 11.6% MoM. From January to November 2024, cumulative imports reached 1.1076 million mt, up 8.6% YoY. In November, Malaysia's import volume declined by 18,000 mt from the previous month due to port congestion, while imports from other countries increased slightly but were not enough to offset the overall decline in imports. After mid-November, the domestic price center of ADC12 shifted downward along with aluminum prices, while overseas prices remained relatively stable. At the same time, the US dollar index surged, and the Chinese yuan continued to depreciate, with the yuan-to-dollar exchange rate falling below the 7.3 mark, the lowest since September 2023. Under the combined influence of multiple factors, the immediate profitability of imported ADC12 turned into a loss, and the import volume of aluminum alloy ingots is expected to continue declining after December. The chart below shows the profitability of imported ADC12: Overall, in December, secondary aluminum alloy prices showed a trend of being more likely to rise than fall, supported by aluminum scrap costs, with the premium of ADC12 prices over A00 prices continuing to expand. Entering January, some regions actively promoted the "reverse invoicing" policy. However, due to undersupply, manufacturers found it difficult to pass on the increased costs to aluminum scrap traders. Therefore, driven by cost pressure, secondary aluminum alloy prices are expected to remain firm in the short term. Click here to view the SMM Metal Industry Chain Database

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Aluminum Prices in December See Expanded Decline; High Costs Make ADC12 Prices More Likely to Rise Than Fall [SMM Analysis]

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