Aluminum Prices Significantly Corrected, Alloy Enterprises' Sentiment to Hold Prices Firm Declined [SMM Cast Aluminum Alloy Morning Comment]

February 2 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2603 contract closed at 22,875 yuan/mt, up 55 yuan or 0.24% from the previous trading day. Trading volume was 7,881 lots, and open interest was 6,287 lots (down 352 lots from the previous trading day). The recent two large bearish candlesticks directly broke through previous support levels, indicating strong bearish momentum. The current price found temporary support near 22,875, but the rebound was weak. The K-value was 29.74, the D-value was 46.15, and the J-value fell to -3.08, entering the oversold zone. This typically suggests that short-term downward momentum may be exhausted, but in a clear downtrend, oversold conditions can persist for some time.

Basis Daily: According to SMM data, on January 30, the SMM ADC12 spot price had a theoretical premium of 1,210 yuan/mt over the closing price of the most-traded cast aluminum alloy contract (AD2603) at 10:15.

Warrant Daily: SHFE data showed that on January 30, the total registered warrant volume for cast aluminum alloy was 68,206 mt, a decrease of 388 mt from the previous trading day. The total registered volume in Shanghai was 5,090 mt (down 30 mt), Guangdong was 23,495 mt (down 31 mt), Jiangsu was 10,549 mt (down 118 mt), Zhejiang was 22,492 mt (down 209 mt), Chongqing was 5,889 mt (unchanged), and Sichuan was 691 mt (unchanged).

Aluminum Scrap: Last Friday, spot primary aluminum prices fell from the previous trading day, with the SMM A00 spot price closing at 24,660 yuan/mt, and aluminum scrap market prices generally pulled back. Baled UBC was quoted at 17,650-18,150 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 19,800-20,500 yuan/mt (tax excluded). On January 30, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 4,088 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 3,174 yuan/mt. The aluminum scrap market was expected to hover at highs this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) at 19,700-20,600 yuan/mt (tax excluded). Before the Chinese New Year, it is necessary to closely track the trend of primary aluminum, the progress of lifting environmental protection alerts in central China, and pre-holiday production halts and holidays, while remaining cautious about aluminum prices retreating after a rapid rise, which could lead to a pullback in aluminum scrap. Market trading activity will remain sluggish.

Silicon Metal: Spot silicon metal prices remained largely stable, with prices for some grades rising slightly. SMM oxygen-blown #553 silicon in east China was at 9,200-9,300 yuan/mt, #441 silicon at 9,400-9,600 yuan/mt, and #421 silicon at 9,500-9,800 yuan/mt. Downstream pre-holiday stockpiling was nearing its end, and spot market transactions turned sluggish. Futures prices held up well, providing some silicon enterprises in the north with opportunities to place sell orders against the futures market.

Overseas market: On the import side, current overseas ADC12 offers remain at $2,900–2,950/mt, showing relative firmness compared to domestic prices, which has narrowed the immediate import profit to around 300 yuan/mt.

Summary: In the spot market, aluminum prices saw a significant correction last Friday. The A00 aluminum price fell by 200 yuan/mt from the previous trading day to 24,660 yuan/mt, while the SMM ADC12 price also dropped by 200 yuan/mt to 24,350 yuan/mt. Before noon, some producers attempted to hold prices firm, limiting the decline in offers; however, as futures continued to fall, the sentiment to hold prices firm dissipated, and the market entered a widespread decline. In terms of transactions, downstream restocking willingness remained weak, with only just-in-time procurement maintained, while the widening spot-futures price spread led to some improvement in trader activity. Approaching the Chinese New Year, downstream demand tends to contract, and fundamental support is limited. However, with high aluminum scrap costs and phased tightening of supply, the downside room for prices is constrained. In the short term, secondary aluminum alloy prices are expected to hover at highs.

[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, and are for reference only, not constituting decision-making advice.]