According to the latest data from the General Administration of Customs, in June 2026, China imported 210,900 mt in physical content of copper scrap and shredded copper scrap, up 10.43% MoM and up 15.11% YoY. In January-June 2026, cumulative imports reached 1.2415 million mt in physical content, up 8.39% YoY.

This week (July 13-16), the copper scrap market operated under a triple framework of copper prices retreating after rapid rises, ongoing reverse-invoicing compliance constraints, and deepening high-temperature off-season. The most-traded SHFE copper contract surged to 105,020 yuan/mt mid-week, up nearly 2,000 yuan/mt from the start of the week. However, copper scrap prices were supported by compliance costs and suppliers holding prices firm, so the weekly price fluctuation was less than 1,000 yuan/mt. The price spread between primary metal and scrap widened from 2,445 yuan/mt at the start of the week to 3,923 yuan/mt, up more than 2,200 yuan/mt from the previous weekend. The widening spread was entirely driven by the unilateral rise in copper cathode. The resistance of copper scrap to decline was a key supply-side feature this week, which directly spurred hedging-related purchase demand from secondary copper rod enterprises. The supply side continued the structurally tight pattern seen since 2026. The first underlying constraint was reverse-invoicing compliance requirements: aftershocks from compliance inspections in Jiangxi and Hubei in south China persisted, and invoice quotas remained restricted in Shuyang, Jiangsu, leaving available compliant and deductible copper scrap persistently tight. The second was that after Document 770 eliminated irregular local tax rebates at the end of 2025, small and medium-sized copper scrap traders that previously relied on subsidies were continuously exiting the market, and overall available supply contracted markedly compared with the same period in previous years. Additionally, suppliers generally held a psychological defense of not selling cheap before copper prices break below 100,000 yuan/mt, and the selling pace throughout the week closely followed copper price fluctuations. At the start of the week when copper prices pulled back, strong hold-back sentiment prevailed, and tight supply left secondary copper rod enterprises struggling to find low-priced material. In mid-week when copper prices surged above 105,000 yuan/mt, suppliers’ willingness to sell at fixed prices increased, but because downstream scrap-using sectors had weak orders in the off-season and low acceptance of high prices, sales did not occur in large volumes. Most material was purchased by secondary copper rod enterprises using a hedging logic of buying raw material and shorting futures, not for actual production restocking. Many rod enterprises stopped pricing directly after purchasing enough to meet daily demand in the morning session and did not chase higher prices to buy. At the end of the week copper prices consolidated and pulled back, suppliers switched back to hold-back mode, and supply tightened again. Regional divergence persisted. In south China, due to compliance costs and slow capital turnover, bare bright copper purchase prices were 400-600 yuan/mt lower than in the north, maintaining the unusual structure of different prices for the same material. Traders maintained a low-inventory strategy of quick turnover, not daring to stockpile and bet on rising prices. The issue of payment collection cycles extending beyond two weeks remained unresolved, further limiting the release of supply elasticity. The demand side remained overall weak, with secondary copper rod enterprises reporting scarce new orders throughout the week. The price difference between copper cathode rod and secondary copper rod surged to 1,510 yuan/mt mid-week, touching the critical line of economic viability, but lacked sustainability and pulled back to 950 yuan/mt by the week's end. Meanwhile, secondary copper rods remained at a premium to copper futures due to rigid raw material costs. New orders at terminal wire and cable enterprises were weak, and they still held wait-and-see expectations that "copper prices have further downside room," with procurement mainly driven by rigid demand in pulses. Throughout the week, copper scrap transactions were largely driven by copper price fluctuations and hedging demand, while restocking volume for actual production was minimal. After copper prices pulled back at the week's end, rod enterprises' purchase willingness weakened further. The market displayed a weak equilibrium where "when copper prices rise, suppliers sell and rod enterprises collect for hedging; when copper prices fall, suppliers hold back and rod enterprises wait for lower prices." Currently, the market remains constrained by the dual restrictions of compliant invoices and off-season demand. Going forward, if the price difference between primary metal and scrap stabilizes above 1,500 yuan/mt and the implementation rules for reverse invoicing become clearer, this may trigger the release of some rigid demand; otherwise, the weak transaction pattern will persist.

In H1 2026, China's secondary RE oxide output jumped 144% YoY and 28% from H2 2025. Secondary Pr-Nd share rose from 31% to 43.5%, peaking at 46% in Q1 due to tight supply, pricing changes, and higher Pr-Nd in scrap. Q2 share eased to 41% on recovering ore output and weaker demand; tax compliance issues cut June output ~20%. With new standards and tax rectification, H2 share is forecast at 37%, full-year ~40%.

In June 2026, the operating rate of secondary copper rod was 14.04%, below expectations of 14.23%, down 0.66 percentage points MoM and down 19.57 percentage points YoY. In June, the secondary copper rod market operated under three main themes: the full-scale implementation of reverse invoicing compliance inspections, copper prices repeatedly testing the 100,000 mark, and the early timing of the Dragon Boat Festival holiday

[SMM Analysis: 2026 H1 Review and H2 Outlook for Secondary Aluminum Alloy: Resilience Remains, Hidden Concerns Persist] Looking ahead to H2 2026, the secondary aluminum alloy market is expected to continue operating around two main themes: "cost support" and "demand recovery," maintaining an overall pattern of high costs and tight balance.

In H1 2026, the aluminum scrap market faced the dual pressures of tightening policies and weak demand, which weighed on production growth. Coupled with falling primary aluminum prices, an early indicator of a "high opening, low ending" pattern for the year had already emerged. 1. Price Difference Between Primary Aluminum and Scrap In H1 2026, the primary-scrap price difference went through four phases: starting at lows, rapidly widening, consolidating at highs, and then sharply narrowing, falling to a multi-year low by end-June. Phase 1: The price difference was at a relatively low level at the start of the year, with the Shanghai machinery aluminum tense scrap spread ranging between 2,267 and 2,690 yuan/mt. Before Chinese New Year, downstream enterprises gradually entered their holiday break, terminal restocking willingness was low, and the market was marked by "prices without substantial trading." Phase 2: After the holiday, scrap yards gradually resumed operations. Coupled with the US-Iran geopolitical conflict driving up primary aluminum prices sharply, A00 aluminum prices surged from around 23,100 yuan/mt to 25,590 yuan/mt. Aluminum scrap followed the uptrend but at a slower pace, causing the primary-scrap price difference to widen passively. On March 12, the Shanghai machinery aluminum tense scrap spread hit its H1 peak of 3,848 yuan/mt, while the aluminum extrusion scrap spread reached 3,338 yuan/mt. Phase 3: Primary aluminum prices pulled back from highs. Scrap aluminum, affected by policy compliance requirements, saw tighter supply of invoiced material and thus declined by a smaller margin, allowing the price difference to gradually narrow from elevated levels. Moreover, during the "Golden March and Silver April" peak season, demand fell short of expectations, and downstream scrap utilization enterprises mainly purchased as needed. Phase 4: In late June, A00 aluminum prices accelerated their decline, but scrap aluminum showed resilience due to cost support from the reverse invoicing policy, resulting in a rapid narrowing of the price difference. As of July 7, the Shanghai machinery aluminum tense scrap spread stood at 2,080 yuan/mt, and the aluminum extrusion scrap spread had narrowed to 1,588 yuan/mt. Some cast aluminum alloy producers had already begun to consider substituting A00 aluminum ingots for scrap. 2. Scrap Yard Inventories and Warehouse Withdrawals At the start of the year, after environmental protection-driven production restrictions were lifted in central China, inventories of wrought aluminum scrap approached saturation. However, downstream enterprises had extremely low willingness to stockpile due to high aluminum prices, and some planned to shut down early. The overall domestic scrap market showed resistance to high prices and a "price without market" situation, with scrap yard withdrawals continuing to decline alongside downstream production cuts. Around the Chinese New Year period, scrap yards and scrap utilization enterprises gradually closed for the holiday. Outbound shipments were completely suspended, with only a small amount of delayed arrivals contributing minor inbound volumes, and market trading activity was nearly frozen. After the holiday, as scrap yards fully resumed operations, the release of supply increased somewhat. Downstream restarts accelerated, and restocking demand was slowly released. However, constrained by the reverse invoicing policy, overall trading remained relatively sluggish, with withdrawals dominated by small, need-based orders. Meanwhile, at high aluminum prices, scrap yards held back from selling, and warehouse inflows rose with climbing scrap production, causing social inventories to shift from destocking to accumulation. Following the crackdown on invoice-related irregularities and the tightening of the reverse invoicing policy, YoY inflows at mainstream yards in some regions declined, and inventories showed a mild buildup trend. In contrast, inventories of aluminum tense scrap actually decreased. Over the same period, downstream sectors entered the traditional consumption off-season. Operating rates at scrap utilization enterprises stayed low, end-user orders lacked momentum, and the procurement pace turned more conservative. 3. Policy Since the "reverse invoicing" policy was rolled out in 2025, its enforcement was continuously tightened in H1 2026, but local implementation standards diverged significantly — regulatory oversight was relatively stringent in Anhui, Jiangxi, Hubei, and other regions. Some provinces saw the cancellation of tax refunds and intensified tax audits. Shandong also saw reports that reverse invoicing would be suspended from July, with the overall tax burden reaching up to 10.5%. This policy environment has directly led to persistently high tax compliance costs in the aluminum scrap recycling segment. Moreover, under the invoice-based economy norms, traders' invoicing quotas generally declined, causing a structural shortage of compliant invoiced scrap cargoes and notably tightening aluminum scrap liquidity. For scrap utilization enterprises, the impact has propagated along a chain of "tighter raw materials/rising costs — production cuts/suspensions — substitution risks": first, rising prices of invoiced raw materials directly pushed up procurement costs; subsequently, many small and medium-sized scrap utilization enterprises in regions such as Anhui, Jiangxi, and Hubei suffered losses and cut or suspended production; ultimately, the price difference between primary metal and scrap narrowed rapidly to historical lows as aluminum scrap held firm while primary aluminum fell, sharply eroding the cost advantage of scrap over primary aluminum. Some cast aluminum alloy enterprises are already considering using A00 aluminum ingots to replace aluminum scrap in production, posing a risk that the market demand base for aluminum scrap could be eroded. 4. Aluminum Scrap Production In terms of total volume, China's cumulative aluminum scrap production in January-June 2026 was 4.2928 million mt, up approximately 11.58% YoY from 3.8472 million mt in the same period of 2025. January production stood at 765,700 mt, surging 48.97% YoY, primarily due to the later Chinese New Year, leading to far more effective production days than the same period last year, coupled with front-load orders caused by the phase-out of auto industry policies. Affected by the Chinese New Year break, February production seasonally pulled back to 541,200 mt, but still grew by 10% YoY. March-April entered the traditional peak season, with production rebounding to 753,400 mt and 781,200 mt, posting YoY growth of 5.14% and 12.81%, respectively. The peak of the season was in April, and capacity release and the pace of work resumption remained normal. However, May production pulled back to 739,300 mt, with YoY growth narrowing to only 4.13%, indicating that the squeeze from the reverse invoicing policy on small and medium-sized scrap utilization enterprises began spreading from isolated cases to a broader scale. This trend accelerated in June, as production further dropped to 712,000 mt, turning negative YoY at -1.4% and down 3.69% MoM from May, making it the only month in H1 with negative YoY growth. The key reasons for the June decline were: the rising compliance costs caused by the reverse invoicing policy had already driven many small and medium-sized scrap utilization enterprises in Anhui, Jiangxi, Hubei, and other areas into losses and production cutbacks, while the price spread between primary metal and scrap narrowed to historical lows, sharply diminishing the cost advantage of aluminum scrap. This dampened collection enthusiasm and caused a supply contraction at the source. Therefore, beneath the surface of "total volume growth but a front-loaded, then decelerating pace" in H1 aluminum scrap production, the reality is that the policy shock is rapidly transmitting from the cost side to the supply side, and the downward pressure on H2 production cannot be underestimated. 5. Aluminum Scrap Imports China’s cumulative aluminum scrap imports from January to May 2026 stood at approximately 849,300 mt, edging down 0.84% YoY from 856,500 mt in the same period of 2025. On the surface, the total volume was almost flat, but the monthly trend showed a pronounced “high-then-low” pattern, and the driving force shifted from ample overseas supply in Q1 to a combination of multiple bearish factors in Q2. Q1 cumulative imports grew 3.9% YoY, with Thailand as the largest source country maintaining steady shipments. At the beginning of the year, relatively ample overseas aluminum scrap supply and active stockpiling by domestic secondary aluminum enterprises together supported the high imports. Entering Q2, the situation took a sharp turn for the worse: April imports were 171,000 mt, down 10.4% YoY, and May imports further dropped to 152,000 mt, down 4.8% YoY and 10.9% MoM, forming a contraction pattern of declining volumes and prices. The bearish factors behind this were multidimensional and mutually reinforcing. First, the US-Iran geopolitical conflict drove LME aluminum prices sharply higher, and overseas spot aluminum scrap prices rose accordingly. The overall landed cost for domestic import traders was significantly higher than domestic aluminum scrap prices, and the persistent inversion of the price spread between Chinese and overseas markets directly dampened procurement enthusiasm. Second, high energy prices in Europe intensified competition among local secondary aluminum enterprises for aluminum scrap raw materials, and shipments to China from traditional source countries such as the UK, Spain, Belgium, and France all pulled back to varying degrees. A more far-reaching impact came from policy tightening in exporting countries: the UAE imposed a four-month temporary ban on aluminum scrap exports starting June 3, and the EU also plans to impose an additional 15% tariff starting September. Both factors tightened the availability of high-quality scrap in the Asian region from both immediate and expected aspects. In addition, aluminum scrap imports typically have a shipping lead time of 1-3 months. The significant reduction in purchases by traders in Q2 will be reflected in landing data in Q3, creating a “lagged impact.” Overall, although the total imports from January to May only edged down slightly, the driving structure has reversed from “stable volumes and rising prices” in Q1 to “declining volumes and prices” in Q2. Moreover, the contraction in overseas supply has only just begun to materialize, and the import outlook for H2 faces greater downward pressure. 6. H2 Outlook The aluminum scrap market is expected to continue consolidating on a subdued note in H2, but with significant bottom support. The price difference between primary metal and scrap has narrowed to a historic low, and the reverse invoicing policy constraint continues to establish a floor for aluminum scrap prices. If primary aluminum prices stabilize and rebound, there is room for a slight recovery in the spread, but the extent is limited; if primary aluminum continues to decline, the substitution effect of aluminum scrap will materialize at a faster pace, putting further pressure on the spread, and an extreme scenario of price inversion between scrap and primary aluminum may even emerge. The reverse invoicing policy is unlikely to see substantive easing in the near term, and the tightness of compliant, invoiced supply is expected to persist. Close attention should be paid to the policy implementation standards in newly joined provinces such as Shandong, changes in local tax inspection intensity, and whether there will be a window for optimizing and adjusting policy details. Overall, the core tension in the aluminum scrap market in H2 remains the tug-of-war between "supply contraction driven by policy tightening" and "consumption weakness caused by sluggish demand." Close attention also needs to be paid to progress in US-Iran negotiations and navigation conditions in the Strait of Hormuz, the pace of aluminum scrap arrivals from outside China and enforcement of the UAE ban, the compliance progress pace of the reverse invoicing policy and differences in local implementation, changes in aluminum ingot inventories, and when the inflection point for secondary aluminum alloy ingot inventory will appear. [Data source statement: Data other than public information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.]