Supply and demand gradually recover ADC12 prices mainly hold up well [SMM Cast Aluminum Alloy Morning Comment]

3.2 SMM Cast Aluminum Alloy Morning Comment

Futures: During the night session on Friday, the most-traded AD2604 futures contract for aluminum alloy opened lower and fluctuated in a weak consolidation. After a brief spike, the price quickly dropped to a low of 22,580 yuan/mt, then oscillated around the intraday moving average with intense tug-of-war between longs and shorts. Near the end of the session, the price slightly rebounded, closing at 22,680 yuan/mt, down 50 yuan/mt or 0.22% from the previous trading day's settlement. In terms of volume and open interest, the night session saw 3,396 lots traded, with open interest decreasing by 530 lots to 7,390 lots, mainly due to bulls reducing their positions, indicating cautious market sentiment.

Daily Basis Report: According to SMM data, on February 27, the theoretical premium of SMM ADC12 spot price over the closing price of the most-traded cast aluminum alloy futures contract (AD2604) at 10:15 was 1,215 yuan/mt.

Daily Warrant Report: SHFE data showed that on February 27, the total registered amount of cast aluminum alloy warrants was 64,454 mt, a decrease of 1,720 mt from the previous trading day. The total registered amount in Shanghai was 6,429 mt, down 61 mt; in Guangdong, it was 21,847 mt, down 303 mt; in Jiangsu, it was 8,679 mt, down 210 mt; in Zhejiang, it was 21,582 mt, down 1,116 mt; in Chongqing, it was 4,564 mt, down 30 mt; and in Sichuan, it was 1,353 mt, unchanged.

Aluminum Scrap: On Friday, the spot primary aluminum price decreased by 110 yuan/mt compared to the previous day, with the overall scrap aluminum market showing mixed declines. Regarding the price difference, on February 26, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,388 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,511 yuan/mt. Regions such as Jiangxi, Hunan, and Anhui chose to observe without adjusting prices. After the Chinese New Year holiday, most domestic yards resumed operations and shipments between the eighth and tenth days, with downstream aluminum processing enterprises' raw material inventories dropping to low levels, creating restocking needs. However, the 2026 Chinese New Year holiday was longer than in previous years, leading to a delayed large-scale restocking. There were no clear signs of recovery in scrap aluminum shipments. It is expected that this week, the scrap aluminum market will hover at highs, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) operating within 19,000-19,600 yuan/mt (excluding tax). Supply side, yards are gradually resuming full operations, increasing the release of sources, but recycling policies still constrain liquidity. Demand side, the pace of downstream enterprise resumption is accelerating, and restocking demand is expected to be slowly released. The tug-of-war between supply and demand continues, with the trading atmosphere gradually recovering but remaining sluggish. Close attention should be paid to the progress of downstream resumption, the trend of primary aluminum prices, and changes in recycling policies, while being vigilant about the risk of price fluctuations.

Silicon Metal: Last week, silicon metal prices consolidated at lows, with SMM east China oxygen-blown #553 silicon ranging from 9,000 to 9,200 yuan/mt, and prices declined during the week. After Chinese New Year, inquiry activity and rigid demand transactions steadily increased. Futures of the most-traded contract fell, but silicon enterprises had little willingness to cut prices significantly. Attention should be paid to changes in operating rates on both supply and demand sides.

Overseas Market: Overseas ADC12 quotations were continuously raised to the range of $2,900—$2,950/mt, while domestic price increases were insufficient, narrowing the import profit and loss to the break-even point.

Summary: After the holiday, market inquiry atmosphere gradually recovered, and trading activity increased, but actual transaction volumes remained limited. Currently, downstream enterprises are mainly focused on restocking based on rigid demand and prioritizing the digestion of pre-holiday inventories. Entering March, as end-users fully resume operations, the certainty of MoM demand improvement will increase, and consumption is expected to continue its rebound. With full production resumptions after the Lantern Festival, market circulation is expected to gradually increase. Under the backdrop of relatively stable raw material supply and moderate industry profits, if primary aluminum prices hold up well, enterprise production enthusiasm is likely to be maintained, and supply pressure will marginally increase. However, attention should still be given to potential impacts of policy changes on the production pace of enterprises in Anhui and other regions. Overall, in the short term, ADC12 prices are expected to mainly move sideways, but as demand gradually recovers, the center of price fluctuations is likely to continue rising. Before the full realization of production resumption, slow supply release coupled with cost support limits the downside space for prices; as enterprises fully resume production, market focus will gradually shift towards the actual fulfillment of end-use consumption. If there is a phased increase in terminal orders, combined with strong primary aluminum prices, ADC12 prices still have room for further upward correction; conversely, if demand recovery falls short of expectations, prices may continue to consolidate at current levels.

[Data Source Statement: Other data, except for public information, is processed by SMM based on public information, market communication, and SMM's internal database model, for reference only and does not constitute decision-making advice.]