Supply contraction while off-season demand suppresses the market [SMM Cast Aluminum Alloy Morning Comment]

Jun 12 SMM Cast Aluminum Alloy Morning Comment

Futures: The overnight session of the most-traded AD2608 cast aluminum alloy futures contract retreated after a rapid rise. After opening at 23,320, it hit a high of 23,355, then fluctuated downward, touching a low of 23,235, and closed at 23,240, edging down 30 points (down 0.13%). Trading volume was 2,496 lots, and open interest increased by 203 lots to 15,809 lots.

Spot-Futures Price Spread Daily: According to SMM data, on June 11, the theoretical premium of the SMM ADC12 spot price over the 10:15 AM closing price of the most-traded cast aluminum alloy futures contract (AD2608) was 810 yuan/mt.

Warrant Daily: SHFE data showed that on June 11, total registered warrants for cast aluminum alloy were 37,931 mt, a decrease of 1,293 mt from the previous trading day. Shanghai-registered volume was 2,897 mt, unchanged from the previous trading day; Guangdong-registered volume was 8,165 mt, a decrease of 483 mt; Jiangsu-registered volume was 7,711 mt, a decrease of 330 mt; Zhejiang-registered volume was 12,484 mt, a decrease of 270 mt; Chongqing-registered volume was 5,829 mt, a decrease of 60 mt; Sichuan-registered volume was 845 mt, a decrease of 150 mt.

Industry Dynamics: This week, the operating rate of leading secondary aluminum enterprises slipped 0.5 percentage points WoW to 53.4%, pressured jointly from both the cost and demand sides. Invoice constraints tightened raw material procurement from the supply side, while weakening demand compressed shipment space on the consumption side, converging to push enterprises to cut production loads actively or passively. If invoice sourcing issues persist, regulatory oversight remains stringent, and the consumption off-season deepens further, the industry operating rate still faces downward pressure, and the supply-side contraction will continue.

Aluminum Scrap: On Thursday, the SMM A00 price recovered 190 yuan/mt WoW to 23,970 yuan/mt, while the aluminum scrap market followed suit with a slight decline. Price spreads: on June 11, the price spread between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,598 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,060 yuan/mt. The continuous narrowing of these spreads reflects relatively strong bottom-side support for aluminum scrap. Aluminum scrap market prices are expected to remain in the doldrums at elevated levels, but downside room is limited. Tight supply of compliant, invoiced cargo persists, and the scarcity of invoices provides bottom support for aluminum scrap prices. The lagged contraction effect from imported aluminum scrap has not fully materialized, and subsequent port arrivals will run at low levels. Escalating US-Iran conflict has further exacerbated the inverted price spread between Chinese and overseas markets, keeping import supplementation constrained. Meanwhile, against the deepening off-season, order sustainability for downstream scrap utilization enterprises is a concern; companies maintain purchasing as needed and low inventory strategies, making a notable improvement in procurement sentiment unlikely, presenting an overall supply-demand weakness pattern.

Silicon Metal: This week, silicon metal prices moved sideways. The futures price fluctuation range widened slightly WoW, with the most-traded SI2609 contract trading within the 8,500-8,800 yuan/mt range. As of June 11, SMM oxygen-blown #553 silicon in east China was at 9,100-9,200 yuan/mt, down 50 yuan/mt WoW; #441 silicon was at 9,300-9,400 yuan/mt, flat WoW; #421 silicon (used in silicone) was at 9,400-9,800 yuan/mt, flat WoW; and #3303 silicon was at 10,100-10,300 yuan/mt, flat WoW.

Markets outside China: Imported ADC12 quotes pulled back slightly to $3,350–$3,410/mt. The immediate import loss per metric ton narrowed to around the 2,800-yuan mark, easing the inversion somewhat, but the theoretical import window remains closed.

Summary: On Thursday, mainstream ADC12 enterprises generally raised their quotes by 100 yuan/mt, and the price center shifted further upward, with the SMM ADC12 quote rising to 24,000 yuan/mt. Persistently high raw material procurement and compliance operating costs have notably squeezed corporate profits, driving producers to hike prices to pass on cost pressure; meanwhile, supply tightened somewhat, finished product inventories are low, and spot cargo availability is tight. However, downstream demand performance remained weak, with no significant recovery in purchasing interest. Most enterprises reported stable orders, and transactions were still dominated by rigid demand. Given limited demand-side support, the actual transaction capacity after price hikes still faces a test. Overall, the current ADC12 market shows a characteristic of "cost-push rise, demand-constraint on gains." Short-term prices may continue to hold up well, but further upside room still hinges on the pace of downstream demand recovery.

[Data Source Statement: All data, except publicly available information, are derived by SMM based on public information, market communication, and SMM's internal database models. This content is for reference only and does not constitute decision-making advice.]