According to recent research published by Shenwan Hongyuan, the domestic recycled aluminum industry is currently fragmented with low utilization levels. In light of the dual carbon goals coinciding with resource supply guarantees, policies are expected to intensify, facilitating improvements in the industry's recycling systems and transitioning from a "small and scattered" model to "scale production," thus unleashing the potential of urban mining. It is recommended to focus on companies with high raw material supply reliability and advanced utilization technologies, as well as those capable of producing high-premium products.
Key insights from Shenwan Hongyuan include: the recycled aluminum supply chain is short with high recovery value, making it a significant growth area for China's aluminum supply. Recycled aluminum (secondary aluminum) is produced from scrap aluminum that is melted and refined into aluminum alloys. The upstream consists of scrap aluminum recycling, the midstream involves melting and alloying, while the downstream finds widespread applications in the automotive, construction, and electronics sectors. In 2024, China's recycled aluminum production is expected to reach approximately 10.5 million tons, accounting for about 19% of total aluminum supply. The Ministry of Industry and Information Technology's "Implementation Plan for High-Quality Development of the Aluminum Industry" sets a production target of over 15 million tons by 2027, corresponding to a compound annual growth rate (CAGR) of 13% from 2024 to 2027, marking the onset of a policy-driven rapid expansion phase.
The demand for resource supply guarantees is rising; recycled aluminum is a critical solution to the high dependence on imported bauxite. Many regions in China have bauxite reserves with a static可开采年限（static years of exploitable reserves）of less than ten years, and from January to August 2025, the import dependency for bauxite reached over 77.6%. Electrolytic aluminum production capacity is nearing the policy ceiling of 45 million tons, limiting growth potential. Meanwhile, the primary source of recycled aluminum is the domestic scrap aluminum stock (with over 80% of domestic scrap aluminum recycling in 2024). From the perspective of ensuring safety in aluminum resource supply, robust development of recycled aluminum can significantly reduce reliance on overseas bauxite, creating a more resilient domestic supply chain.
With dual carbon constraints and the establishment of carbon markets, the green premium for recycled aluminum is accelerating. The carbon emissions from producing one ton of electrolytic aluminum is approximately 11.2 tons, while recycled aluminum emits only 0.23 tons, which is just 2.1% of electrolytic aluminum's emissions. By 2025, the aluminum smelting industry will be incorporated into the national carbon market, and the tightening of overall quotas and increased paid distribution are expected to fundamentally enhance quota scarcity, driving up carbon prices. The European Union's Carbon Border Adjustment Mechanism (CBAM) will fully tax in 2026, allowing exported recycled aluminum products to avoid carbon tariffs, enlarging the green premium as carbon prices rise.
On the demand side, the push for lightweight vehicles and new energy infrastructure is driving aluminum consumption, with recycled aluminum playing a vital role as a low-carbon solution to fill gaps. The potential for urban mining is immense, and the construction of a recycling system is progressing rapidly, driven by policy—central enterprise platforms—key enterprises proceeding simultaneously. Under the tax "reverse invoicing" policy, small recycling businesses will benefit, while China Resources Recycling Group is working to establish a national-level recycling platform. It is expected that starting in 2026, automotive scrapping will gradually peak (with 2011 sales peak corresponding to a scrapping cycle of around 15 years), potentially alleviating raw material bottlenecks systematically.
Risk warnings include: the risk of recycled aluminum supply falling short of expectations; the risk of significant fluctuations in aluminum prices; the risk of policies not being implemented as anticipated.