Overnight Contracts Surge and Close Higher; Short-Term ADC12 Moves Sideways [SMM Cast Aluminum Alloy Morning Comment]

Jul 8 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded aluminum alloy 2609 contract opened at 22,910 yuan/mt in the overnight session, dipped to a low of 22,865 yuan/mt, then consolidated and surged to a session high of 23,130 yuan/mt before pulling back slightly at the close to end at 23,060 yuan/mt, up 150 yuan/mt or 0.65% from the previous settlement price, with a total fluctuation range of 195 yuan/mt. Night session trading volume totaled 3,618 lots, down 2,390 lots from the prior period, while open interest rose slightly by 83 lots to 19,071 lots. The intraday pattern showed a low open, a surge, and then high-level consolidation and pullback. The short-term RSI indicator touched 79.22, in overbought territory, while on the 4-hour chart, DKX’s B-line at 22,708.88 yuan/mt and D-line at 22,697.04 yuan/mt offered bullish support; the KDJ’s K value at 74.18 and D value at 61.47 remained in bullish territory. Overall, bulls held the edge during the night session, but short-term upward momentum weakened somewhat.

Spot-Futures Price Spread Daily: According to SMM data, as of 10:15 AM on Jul 7, the theoretical premium of SMM ADC12 spot price to the most-traded cast aluminum alloy futures contract (AD2608) was 1,140 yuan/mt.

Warrant Daily: SHFE data showed that total registered cast aluminum alloy warrants stood at 23,237 mt on Jul 7, down 1,016 mt from the previous trading day.

Aluminum Scrap: Yesterday, SMM A00 spot aluminum prices closed at 22,940 yuan/mt, up 100 yuan/mt MoM. Aluminum scrap markets tracked those gains overall, with some regional categories catching up on the previous day’s rally. In terms of scrap spreads, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 1,956 yuan/mt on Jul 7, while the price difference between A00 aluminum and shredded aluminum tense scrap was 642 yuan/mt. Supply side, the near-term constraints from the reverse-invoicing policy remain hard to reverse, keeping compliant invoice-backed supply relatively tight. Import side, the cumulative lagged impact of multiple headwinds on actual port arrivals will become increasingly visible in the coming months, further weighing on imported aluminum scrap. Demand side, operating rates downstream stayed low amid a deepening off-season, and end-user orders remained weak, making it highly likely scrap utilization enterprises would keep purchasing as needed and maintain low-inventory strategies. The scrap spreads have narrowed to historical lows, significantly eroding the cost advantage of aluminum scrap over primary aluminum. Should aluminum prices continue to decline, the substitution effect would accelerate.

Silicon Metal: Yesterday, SMM oxygen-blown #553 silicon in east China was around 9,000 yuan/mt, and #441 silicon around 9,200 yuan/mt, stable from the day before. The most-traded futures contract consolidated in stalemate below 8,400 yuan/mt. Recently, fundamentals have driven supply-demand logic, with prices encountering resistance and consolidating on a subdued note.

Markets Outside China: Overseas ADC12 prices extended their decline, with recent quotes dipping further to the $3,100-3,200/mt range. In contrast, domestic ADC12 prices held relatively firm, supported by aluminum scrap costs, so the price spread between Chinese and overseas markets continued to repair and import losses gradually narrowed, currently around 1,087 yuan/mt. According to this week’s transactions, some deals were concluded at $3,000/mt, essentially at the break-even import line. In the short term, the domestic-overseas discount is expected to narrow further, with import profit windows likely opening gradually.

Summary: China’s secondary aluminum alloy market was consolidating on a strong note on Tuesday, with SMM ADC12 prices up 50 yuan/mt MoM to 24,050 yuan/mt. Rebounds in aluminum prices and high procurement costs remained the core factors supporting enterprises’ effort to hold prices firm; the tight flow of aluminum scrap and elevated procurement costs left companies limited room to cut prices. However, downstream demand recovered at a slow pace, with only average order increments. Some enterprises expressed concerns about whether transactions could keep up after price hikes, and most opted to hold prices steady and wait for clarity. Overall, cost support and a recovering futures market are driving the ADC12 price center higher, but demand side has yet to provide effective coordination. In the short term, the market is expected to move narrowly, resistant to declines but with upside room also limited.

[Data Sourcing Statement: Except for public information, all data herein is processed by SMM based on public information, market communication, and SMM’s proprietary database models. It is for reference only and does not constitute any decision-making advice.]