After hitting a high of CNY24,410 per ton last Friday, the main cast aluminum alloy futures contract has recently declined amid volatility. On one hand, the precipitous decline in precious metal prices triggered panic that swiftly spread across the entire nonferrous metals sector, leading to capital outflows and concentrated liquidation of long positions. On the other hand, heightened market expectations of a potential shift toward a more hawkish stance in the Federal Reserve's monetary policy have strengthened the U.S. dollar, thereby suppressing the prices of dollar-denominated commodities.

Scrap Aluminum Raw Materials: Tight Supply-Demand Balance Amid Dual Growth in Domestic Recycling and Imports

Driven by both policy and market forces, China's scrap aluminum market in 2025 exhibited a pattern of rising volumes and firm prices. The domestic recycling system continued to expand, while imports remained robust to supplement raw material supply.

Data indicates that domestic scrap aluminum recovery surged significantly in 2025, reaching 8.5927 million tons for the year—a 14.6% year-on-year increase. Notably, December 2025 alone recorded 821,000 tons of scrap recovery, marking a substantial 28.08% year-on-year growth. This growth primarily stemmed from the continuous improvement of the domestic recycling network, advancements in front-end sorting and dismantling technologies, and intensified efforts in the systematic development of “urban mines.” However, the increase in recycling volumes failed to alleviate the overall tight market balance. Scrap aluminum prices remained firm due to rigid demand from downstream recycled aluminum capacity, structural shortages of certain high-quality scrap materials, and strong cost support from elevated primary aluminum prices.

To bridge the domestic supply gap, China's scrap aluminum imports grew concurrently. SMM data indicates that in 2025, China's scrap aluminum imports reached 2.01 million tons, marking an 11.67% year-on-year increase. By the end of 2025, the growth rate of scrap aluminum imports accelerated further, with December imports reaching approximately 194,100 tons—a 19.36% month-on-month increase and a 22.82% year-on-year rise. This import growth is primarily driven by three factors: first, policies encouraging the import of high-quality recycled raw materials provide stable expectations; second, the continuous release of domestic recycled aluminum capacity creates strong demand; and third, the stabilization of aluminum prices at elevated levels stimulates corporate restocking needs.

Entering January, the scrap aluminum market exhibited a typical pattern of “prices without transactions.” Data indicates that as of January 29, while scrap aluminum prices surged alongside primary aluminum, actual transactions remained sluggish. This stems from “weak supply and demand.” On the supply side, fiscal policy adjustments abruptly reduced market liquidity, compounded by pre-holiday closures at scrap yards, significantly tightening supply. Demand, meanwhile, faced dual pressures from environmental production restrictions and the rapid rise in aluminum prices, causing purchasing intent to plummet. In the short term, the scrap aluminum market is expected to remain volatile at elevated levels. While high primary aluminum prices and restricted circulation provide a floor, sluggish demand and recurring environmental production curbs will intensify market uncertainty, making it difficult to break the “prices exist but no transactions occur” pattern.

Recycled Aluminum Alloy Industry: Intensified Off-Season Differentiation

From late 2025 to early 2026, China's recycled aluminum alloy market presented a complex landscape on both the import and domestic production fronts. In 2025, recycled aluminum alloy imports contracted overall but saw a brief rebound toward year-end. Domestically, the recycled aluminum alloy sector entered its seasonal off-peak period, marked by pronounced internal structural divergence.

Customs data indicates that China's cumulative imports of unwrought aluminum alloys reached 1.0073 million tons in 2025, down 17% year-on-year. This downward trend stemmed primarily from prolonged import price inversions throughout most of the year. Particularly from July to November 2025, overseas cost pressures and policy-driven price hikes outpaced domestic price adjustments, resulting in sustained import losses that dampened trader enthusiasm. However, imports surged by 27.2% month-on-month to 93,100 metric tons in December 2025. This rebound was driven by short-term factors: a low base from the previous period and the reopening of import arbitrage opportunities in late December 2025. January imports are expected to continue growing month-on-month.

The domestic recycled aluminum alloy industry has entered its traditional off-season, with internal disparities intensifying. According to SMM data, domestic recycled aluminum alloy ingot production reached 640,400 metric tons in December 2025, marking a 6.16% month-on-month decline and a marginal 1.27% year-on-year increase. The market exhibits a pattern where large plants operate at full capacity while small plants suspend operations. Entering January, off-season characteristics have become more pronounced. Despite persistently high primary aluminum prices, cost pass-through to downstream players remains constrained. Die-casting enterprises face squeezed profit margins due to rigid pricing at the end-user level, leading to subdued procurement sentiment. Beyond essential production needs, most have delayed inventory replenishment, resulting in sluggish market transactions. Concurrently, scrap aluminum supply remains tight. Although the Spring Festival holiday approaches, recycled aluminum alloy producers maintain cautious inventory positioning, with overall stockpiles accumulating only modestly. Under dual pressures of weakening demand and raw material constraints, the operating rate of the recycled aluminum alloy industry continued its downward trend. Relevant data indicates that as of the week ending January 29, the industry's operating rate dropped to 58.9%, a slight decrease of 0.4 percentage points from the previous week. It is expected to decline further before the Spring Festival holiday.

Inventory trends, however, showed divergence. Domestic social inventories of recycled aluminum ingots continued to decline, while factory inventories passively accumulated. Specifically, social inventories have been falling since mid-November 2025, reaching 46,400 metric tons by January 29—a weekly decrease of 1,100 metric tons. Conversely, factory inventories rose, with raw material stocks at 41,100 metric tons and finished product inventories at 21,500 metric tons as of February 2. Against a backdrop of weakening demand, incoming raw materials have led to passive accumulation, while finished product sales have slowed.

Weak Volatility to Prevail

Looking ahead, casting aluminum alloy futures prices are expected to remain in a weak, volatile range. Both upward potential and price independence are constrained, stemming from the ongoing tug-of-war between robust cost support and weak fundamental demand. Robust cost support fundamentally prevents deep price corrections. On one hand, core raw material scrap aluminum supply remains tight with firm pricing; on the other, the key price anchor—primary aluminum—trades above 24,000 RMB/ton, jointly establishing a solid cost floor. Additionally, enterprises will temporarily tighten supply ahead of the Spring Festival holiday. However, weak demand severely limits upward price potential. Terminal demand faces dual suppression from seasonal slowdown and high aluminum prices, hindering cost pass-through to downstream sectors. The market exhibits a classic “price without transaction” scenario. Consequently, prices struggle to break free from cost-driven dynamics to form independent upward momentum. Future price movements hinge on the intensity of this ongoing tug-of-war between the two forces.

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