Off-Season Demand Hard to Improve; Aluminum Alloy Prices Mainly Move Sideways [SMM Cast Aluminum Alloy Morning Comment]

July 9 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2609 contract opened at 23,050 yuan/mt in the overnight session, rose to 23,050 yuan/mt before pulling back under pressure, hitting a low of 22,840 yuan/mt, and closed at 22,895 yuan/mt, down 160 yuan/mt from the settlement price, a decline of 0.69%, with a trading range of 145 yuan/mt. Night session trading volume was 3,093 lots, a decrease of 235 lots from the previous session, and open interest was 19,111 lots, down slightly by 3 lots. The intraday chart showed a consistently weak trend, with prices remaining below the intraday average price line throughout, narrowing losses slightly in late trading. The 4-hour candlestick formed a bearish pullback candlestick. Although short-term indicators remained in bullish territory, bullish momentum on the futures showed signs of weakening.

Daily Spot-Futures Spread Report: According to SMM data, on July 8, the SMM ADC12 spot price was theoretically at a premium of 1,120 yuan/mt over the 10:15 a.m. closing price of the most-traded cast aluminum alloy contract (AD2608).

Daily Warrant Report: SHFE data show that on July 8, total registered warrants for cast aluminum alloy stood at 22,727 mt, down 510 mt from the previous trading day.

Aluminum Scrap: Yesterday, SMM A00 spot aluminum price closed at 23,040 yuan/mt, up another 100 yuan/mt from the previous trading day, and the aluminum scrap market followed the uptrend overall. As for the primary-scrap price spread, on July 8, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan recorded 2,046 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 732 yuan/mt. Supply side, the constraints from the reverse invoicing policy are hard to reverse in the short term, and the tight supply of compliant, invoiced cargoes persists. On the import side, the combined impact of multiple bearish factors on actual port arrivals will gradually emerge in the coming months, and the inflow of imported aluminum scrap will further weaken. Demand side, as the off-season deepens, downstream operating rates remain low, end-user orders are unlikely to see substantial improvement, and scrap utilization enterprises are likely to continue purchasing as needed and maintain low inventory levels. The primary-scrap price spread has narrowed to historical lows, sharply eroding the cost advantage of aluminum scrap over primary aluminum. If aluminum prices continue to decline, the substitution effect will accelerate.

Silicon Metal: Yesterday, SMM #553 oxygen-blown silicon in east China was at 9,000-9,200 yuan/mt, and #441 silicon was at 9,200-9,300 yuan/mt, both unchanged from the previous day. Recently, prices have been guided by supply-demand fundamentals, keeping fluctuations limited, and the market is in a stalemate with a tug-of-war between longs and shorts.

Overseas Markets: Overseas ADC12 prices continued to decline, with recent quotes falling further to the $3,100-$3,200/mt range. In contrast, domestic ADC12 prices remained relatively firm supported by scrap costs, leading to a continued correction in the price spread between Chinese and overseas markets, and import losses have gradually narrowed. Currently, the per-mt loss is approximately 1,068 yuan. Additionally, according to week-to-date transaction feedback, some actual deals have dropped to $3,000/mt, basically hitting the import break-even line. In the short term, the domestic-overseas price inversion is expected to narrow further, and the import profit window may gradually open.

Summary: China’s secondary aluminum alloy market prices mainly consolidated on a strong note on Wednesday, with SMM ADC12 price up 50 yuan/mt from the prior day to 24,100 yuan/mt. Yesterday’s market quotations showed some divergence. Driven by the continued rebound in aluminum prices and futures, some enterprises actively raised their quotations, while others, facing mediocre downstream demand, slowing end-user procurement pace, and significant selling resistance, lacked motivation to adjust prices and chose to hold prices steady and wait. Market sentiment turned cautious. Overall, the ADC12 market saw both price increases and wait-and-see stances, with the uptrend lacking effective demand-side support. In the short term, the market will likely continue to consolidate.

[Data Source Statement: Except for publicly available information, all other data are derived from public information, market communications, and SMM’s internal database models, processed by SMM, and are for reference only. They do not constitute any decision-making advice.]