2.25 SMM Cast Aluminum Alloy Morning Comment
Futures: The most-traded AD2604 contract for cast aluminum alloy closed at 22,275 yuan/mt overnight, down 45 yuan/mt, or 0.20%, from the previous trading day. It opened at 22,305 yuan/mt, hitting a high of 22,435 yuan/mt and a low of 22,235 yuan/mt. Trading volume was 1,471 lots (-4,000), and open interest was 11,534 lots (-6), showing a pattern of shrinking volume and declining open interest. All three lines are in the neutral-to-bullish range of 50-80, with the J-line slightly above the K- and D-lines, indicating moderate short-term momentum but not yet entering overbought territory. Recently, the K- and D-lines formed a golden cross and diverged upward, suggesting a short-term bullish trend, but caution is needed against adjustment pressure from a potential pullback in the J-line.
Spot-Futures Price Spread Report: According to SMM data, on February 24, the SMM ADC12 spot price was at a theoretical premium of 1,375 yuan/mt to the closing price of the most-traded cast aluminum alloy contract (AD2604) at 10:15.
Warrant Report: SHFE data showed that on February 24, the total registered warrants for cast aluminum alloy were 67,506 mt, an increase of 1,140 mt from the previous trading day. By region, total registered warrants were: Shanghai (6,490 mt, unchanged), Guangdong (23,000 mt, down 181 mt), Jiangsu (9,252 mt, up 721 mt), Zhejiang (22,757 mt, up 630 mt), Chongqing (4,654 mt, down 30 mt), and Sichuan (1,353 mt, unchanged).
Aluminum scrap side: Spot primary aluminum prices rose yesterday compared to the last trading day before the Chinese New Year holiday, with the SMM A00 spot price closing at 23,390 yuan/mt. Aluminum scrap market prices followed the increase overall today. Baled UBC was mainly offered at 16,800-17,250 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was mainly offered at 19,100-19,800 yuan/mt (ex-tax). In terms of price differences, on February 24, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,475 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,669 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with downstream demand unlikely to recover quickly. The mainstream range for shredded aluminum tense scrap (priced based on aluminum content) is still expected to fluctuate around 19,000-19,800 yuan/mt (ex-tax). Some aluminum scrap yards and scrap utilization enterprises have not yet resumed operations after the holiday, constraining the recycling of new scrap. Tight supply release, coupled with high aluminum prices, provides bottom support for aluminum scrap prices. However, downstream demand has declined MoM from January, and market transactions are expected to remain sluggish. In the short term, the supply-demand standoff with weak fundamentals on both sides continues, with transactions mainly driven by rigid restocking needs. Close attention should be paid to the pace of post-holiday resumption at downstream processing enterprises, and caution is warranted as post-holiday restart expectations may reignite market sentiment and funds, potentially pushing up aluminum prices and keeping trading activity in the aluminum scrap market sluggish.
Silicon Metal: (1) Price: After the Chinese New Year, the wait-and-see sentiment in the market was strong. Silicon enterprises' quotations were basically stable compared to before the holiday. Yesterday, SMM's oxygen-blown #553 silicon in east China was at 9,200-9,400 yuan/mt, and #441 silicon was at 9,300-9,600 yuan/mt. The most-traded futures contract fluctuated around 8,350-8,450 yuan/mt, with some spot-futures traders reporting a slight strengthening of the spot-futures price spread. On the first day after the holiday, the market was mainly characterized by inquiries, with limited spot transactions. (2) Production: Due to partial production cuts and fewer production days, industrial silicon production in February declined significantly MoM. After the Chinese New Year, the operating rate of silicon enterprises remained basically stable compared to before the holiday. The resumption time for the reduced capacity of top-tier enterprises is still unclear, and attention should be paid to subsequent changes in the industry's operating rate.
Overseas Market: In terms of imports, overseas ADC12 quotations rose slightly to the range of $2,850-2,910/mt. As the yuan strengthened against the US dollar, the immediate profit margin for imports expanded to around 300 yuan/mt.
Summary: On Tuesday, SMM raised the ADC12 price by 100 yuan/mt to 23,750 yuan/mt. On the first day after the holiday, the futures market showed a relatively strong performance, leading to a recovery in market sentiment. However, there was a certain degree of divergence in the quotations from secondary aluminum enterprises. Some enterprises, considering that downstream operations had not fully resumed, maintained their pre-holiday quotation ranges and adopted a wait-and-see approach; others raised their prices by 100 yuan/mt. The atmosphere of market inquiries gradually recovered, but actual transactions remained low, with the market still primarily in a wait-and-see mode. Given that the shutdown period for secondary aluminum plants this year was slightly longer than last year, with most enterprises resuming operations between the eighth and fifteenth day of the first lunar month, the pace of supply release in the first week after the holiday is expected to be slow, providing a temporary bottom for prices. However, the recovery on the demand side is more likely to be gradual, and until terminal orders show a significant increase, downstream purchases will remain cautious and based on need. The cost side needs to continuously monitor fluctuations in the prices of aluminum scrap, copper, silicon, and other auxiliary materials. The trend of primary aluminum remains a key variable affecting market sentiment and the price center. Overall, in the early post-holiday period, the ADC12 price is likely to continue the sideways movement pattern seen before the holiday. Subsequent direction will depend on the match between supply and demand after full production resumptions and the performance of primary aluminum prices. If there is a phase of restocking combined with a strong performance of primary aluminum, there is room for price recovery; otherwise, prices may face slight pressure, but overall, they will still move sideways.
[Data Source Statement: Apart from publicly available information, other data are derived from public information, market communication, and SMM's internal database model, processed by SMM for reference only and do not constitute decision-making advice.]
