SMM Cast Aluminum Alloy Morning Comment on 2.9
Futures: The most-traded aluminum alloy 2604 futures contract opened at 22,195 yuan/mt overnight, pulled back after opening, and hit a low of 22,010 yuan/mt. The price then rebounded to 22,100 yuan/mt and fluctuated at that level, eventually closing at 22,175 yuan/mt, up 130 yuan/mt or 0.59% from the previous close, with the increase mainly driven by bulls adding positions.
Spot-Futures Price Spread Report: According to SMM data, on February 6, the spot price of SMM ADC12 theoretically widened to a spread of 1,595 yuan/mt against the closing price of the most-traded cast aluminum alloy futures contract (AD2603) at 10:15.
Warrant Report: SHFE data showed that on February 6, the total registered warrants for cast aluminum alloy were 67,083 mt, an increase of 537 mt from the previous trading day. The total registered warrants in Shanghai were 5,358 mt, down 30 mt; Guangdong 23,908 mt, up 356 mt; Jiangsu 9,346 mt, down 150 mt; Zhejiang 22,224 mt, up 391 mt; Chongqing 5,556 mt, down 30 mt; and Sichuan 691 mt, unchanged.
Aluminum Scrap: Last Friday, the spot price of primary aluminum continued to pull back from the previous trading day, with SMM A00 spot aluminum closing at 23,140 yuan/mt. Aluminum scrap market prices generally held steady or followed with slight declines. Baled UBC was quoted in the range of 16,700–17,150 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 18,900–19,600 yuan/mt (tax excluded). In terms of the price difference between A00 aluminum and aluminum scrap, on February 6, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,360 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,554 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly trading in the range of 19,000–19,800 yuan/mt (tax excluded). It is necessary to closely monitor the shutdown and resumption of downstream processing enterprises and the progress of environmental protection enforcement in various regions, and be alert to the risk of continued sluggish trading sentiment in the aluminum scrap market after another pullback in aluminum prices.
Silicon Metal: Dragged down by macro and fund sentiment, futures prices showed a downward trend last Thursday and Friday, with the low of the most-traded contract around 8,450 yuan/mt. After the futures decline, some downstream enterprises and traders increased their purchases of futures cargo, mostly in preparation for after the Chinese New Year. The fundamentals of silicon metal showed no major changes.
Overseas Market: On the import side, overseas ADC12 quotations continued to fluctuate at highs. Affected by the decline in domestic prices, the profit margin for imports continued to narrow and even turned into a slight loss at one point, reducing the impact of imported cargo on the domestic market.
Summary: Last Friday, quotations in the secondary aluminum market showed some divergence, with some enterprises choosing to hold steady and wait, while others lowered their quotations by about 100 yuan/mt. Driven by the price pullback, downstream purchases mainly focused on restocking at lower levels, and transaction activity improved slightly compared to the previous period. Supply side, as the Chinese New Year approaches, production schedules of secondary aluminum plants during the holiday period have gradually been clarified. Most enterprises plan to suspend production successively between February 5 and 13, with the resumption of operations concentrated mainly after the eighth day of the first lunar month or after the Lantern Festival. The furnace shutdown period is expected to last between 8 and 20 days, with the overall average shutdown duration extending by about 2 days YoY. The lengthened shutdown period is related, on one hand, to the recent intensified fluctuations in aluminum prices, and on the other hand, to generally weaker downstream demand, as well as the combined impact of tightening policies and ongoing environmental protection-related controls. Overall, downstream demand continues to contract, and fundamental support for prices is marginally weakening. Pre-holiday secondary aluminum alloy prices are expected to remain in the doldrums at high levels, with the price center dropping back slightly.
[Data Source Statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and SMM's internal database model, for reference only and not intended as decision-making advice.]
