Japan: Aluminium scrap market faces resistance amid weaker ingot prices

• Japan scrap market hits pricing ceiling
  
  
• Tight supply cushions scrap market downturn
  
  

Japan Metal Daily: Japan's aluminium scrap market is showing signs of resistance to further price increases, with market participants increasingly viewing current price levels as having reached a ceiling. The decline in aluminium ingot prices, which had been the primary driver of scrap values, has added pressure to the market. Domestic aluminium ingot prices have fallen below JPY 700,000/t, retreating from around JPY 720,000/t at the beginning of the month to JPY 650,000-660,000/t in recent weeks.

Price negotiations between secondary aluminium alloy producers and wholesalers conducted in mid-June largely resulted in unchanged settlement levels nationwide. However, premium scrap grades such as Shinkiri aluminium have already begun to correct lower, reflecting weaker ingot prices and a shift in market sentiment.

Market participants reported growing caution among wholesalers, many of whom are reducing inventories amid expectations of further price declines. Some traders noted that current scrap prices appear unusually high relative to underlying market fundamentals, prompting efforts to process and ship purchased material more quickly. Others indicated that longer-term price indicators are beginning to signal a downward trend, encouraging sales while prices remain elevated.

The recent weakness in aluminium prices has been linked to easing geopolitical concerns in the Middle East. Improved prospects for regional stability and reduced fears over supply disruptions have softened international aluminium prices. Nevertheless, uncertainty remains high, particularly regarding developments surrounding the Strait of Hormuz and ongoing geopolitical negotiations involving the US, Israel, and Iran.

Despite weaker prices, scrap generation remains limited. Seasonal factors, including extreme summer temperatures, factory shutdowns, and holiday-related disruptions, are expected to constrain scrap availability further in the coming months. As a result, competition among buyers for available material is likely to remain intense.

However, some market participants believe supply-demand conditions could temporarily ease if secondary alloy manufacturers lower their purchase prices. In such a scenario, wholesalers may accelerate sales to reduce inventory holdings, potentially increasing spot market liquidity and placing additional short-term pressure on scrap prices.

Note: This article has been written in accordance with a content exchange agreement between BigMint and Japan Metal Daily.