On the second day after the holiday, SHFE aluminum fluctuated rangebound, with market trading remaining sluggish. [SMM Cast Aluminum Alloy Morning Comment]

2.26 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded aluminum alloy 2604 contract closed at 22,895 yuan/mt overnight, up 245 yuan/mt or 1.08% from the previous trading day. Trading volume was 4,318 lots, down 2,547 lots WoW; open interest was 10,400 lots, down 1,079 lots WoW. K=79.91, D=67.43, J=104.86, all three lines were at highs, with the J-line entering the overbought zone. VR: 119.39, indicating improved market activity. Prices remained above short-term moving averages, showing a clear bullish trend.

Spot-Futures Price Spread Report: According to SMM data, on February 25, the SMM ADC12 spot price showed a theoretical premium of 1,350 yuan/mt over the closing price of the most-traded cast aluminum alloy contract (AD2604) at 10:15.

Warrant Report: SHFE data showed that on February 25, the total registered warrant volume for cast aluminum alloy was 67,081 mt, down 425 mt from the previous trading day. By region: Shanghai total registered volume was 6,490 mt, flat from the previous day; Guangdong total registered volume was 22,696 mt, down 304 mt; Jiangsu total registered volume was 9,161 mt, down 91 mt; Zhejiang total registered volume was 22,757 mt, flat; Chongqing total registered volume was 4,624 mt, down 30 mt; Sichuan total registered volume was 1,353 mt, flat.

Aluminum scrap: Spot primary aluminum prices fluctuated rangebound yesterday compared to the previous trading day's quotes, with the SMM A00 spot price closing at 23,380 yuan/mt. Baled UBC was quoted at 16,800-17,250 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted at 19,100-19,800 yuan/mt (ex-tax). Regarding the price difference between A00 aluminum and aluminum scrap: on February 25, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,455 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,649 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 hover around 19,000-19,800 yuan/mt (ex-tax). Some aluminum scrap yards and scrap utilization enterprises have not yet resumed operations post-holiday, constraining new scrap recycling. Tight supply release, coupled with high aluminum prices, provides bottom support for aluminum scrap prices. However, downstream demand decreased MoM from January, and market transactions are expected to remain sluggish. The supply-demand stalemate is likely to persist in the short term, with transactions mainly for essential restocking. Close attention should be paid to the post-holiday resumption pace of downstream processing enterprises, and be cautious that post-holiday restart expectations could reignite market fund sentiment, pushing aluminum prices higher and potentially prolonging sluggish trading activity in the aluminum scrap market.

Silicon metal: On February 25, SMM non-oxygen blown #553 silicon metal in east China was at 9,100-9,300 yuan/mt; oxygen-blown #553 at 9,200-9,300 yuan/mt; #521 at 9,300-9,500 yuan/mt; #441 at 9,300-9,600 yuan/mt; #421 at 9,500-9,800 yuan/mt; #421 for silicone use at 9,800-10,200 yuan/mt; #3303 at 10,200-10,400 yuan/mt. Prices for silicon in some areas of Huangpu Port and Shanghai also declined. Silicon prices in Kunming, Tianjin, the Northwest, Xinjiang, and Sichuan remained stable.

Overseas Market: On the import side, although overseas ADC12 offers increased by $20/mt to $2,870-2,930/mt, supported by the recent strengthening of the yuan against the US dollar, the immediate import profit/loss remained profitable.

Summary: Spot side, the A00 aluminum price edged down by 10 yuan/mt from the previous trading day to 23,380 yuan/mt, while the SMM ADC12 price held steady at 23,750 yuan/mt. Futures overall showed a narrow consolidation trend, and secondary aluminum market offers were mostly stable. During the week, downstream inquiries and actual transactions saw some recovery, but the overall trading atmosphere remained relatively cautious, with market sentiment mediocre. From a fundamental perspective, in the first week after the holiday, the pace of production resumptions at enterprises was relatively slow, and the incremental supply release was limited, providing some support to prices. However, demand recovery is more likely to be gradual; before terminal orders show a significant increase, downstream procurement will mainly focus on restocking for rigid demand, making sustained large-volume transactions difficult. Cost side, it is necessary to continuously monitor price fluctuations of aluminum scrap and auxiliary materials such as copper and silicon, while the trend of primary aluminum will still dominate market sentiment and the price center. Overall, in the initial post-holiday period, ADC12 prices are expected to continue the pre-holiday sideways movement pattern. The subsequent direction will still depend on the extent of supply-demand matching after full production resumptions and the performance of primary aluminum. If phased restocking demand is released alongside a strong performance in primary aluminum, there is some room for price recovery. Conversely, if demand recovery falls short of expectations, prices may face slight pressure but will generally remain in a consolidation range.

[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 do not constitute decision-making advice.]