Aluminum Alloy Futures Drift Higher, Spot Market Remains Stable in Narrow Range Amid Tug-of-War Between Sellers and Buyers [SMM Cast Aluminum Alloy Morning Comment]

7.2 SMM Cast Aluminum Alloy Morning Comment

Futures: Last Friday night, the most-traded AD2609 cast aluminum alloy futures contract drifted higher throughout the night session. It opened at 22,945 yuan/mt, with the session low at 22,935 yuan/mt and the high touching 23,185 yuan/mt, before closing at 23,175 yuan/mt, up 150 yuan/mt or 0.65% from the previous settlement price. In the early night session, prices consolidated briefly at lows before gradually rising, supported by moving averages. In the early morning hours, bulls pushed prices higher to a session high, followed by a slight pullback and then consolidation at highs. Trading volume for the night session was 3,351 lots, while open interest increased slightly by 68 lots. The KDJ indicator remained in bullish territory, and the RSI entered overbought territory. A modest increase in capital-added positions boosted the futures market.

Spot-Futures Spread Daily: According to SMM data, on July 17, the SMM ADC12 spot price had a theoretical premium of over the closing price of the most-traded AD2609 cast aluminum alloy futures contract at 10:15.

Warrant Daily: SHFE data showed that on July 17, total registered warrants for cast aluminum alloy stood at 20,805 mt, down 300 mt from the previous trading day.

Aluminum scrap: The aluminum scrap market is expected to continue moving sideways at high levels this week. On the supply side, the constraints from the reverse invoicing policy are hard to reverse in the short term, and the tight supply of invoiced aluminum scrap will persist. On the import side, the combined effect of multiple bearish factors will gradually become evident in the coming months, and the replenishment of high-quality overseas scrap will remain low. On the demand side, as the off-season deepens, downstream operating rates remain low, end-use orders show little substantial improvement, and scrap utilization enterprises continue to purchase as needed, making a noticeable improvement in procurement sentiment unlikely.

Silicon metal: Last week, the most-traded silicon metal futures contract consolidated around 8,350-8,450 yuan/mt. Spot prices remained stagnant and consolidated, as high freight costs reduced the availability of low-priced cargoes. In terms of quotes and transactions, silicon enterprises kept their offers stable, and spot trading sentiment downstream turned subdued compared with the previous week. Demand-side fundamentals remained generally weak, and the market returned to a stalemate between gains and losses with narrowing fluctuations. The overall silicon metal market remains under pressure.

Markets outside China: Currently, overseas ADC12 offers are in the range of $3,050-3,190/mt. Affected by the slight pullback in overseas offers, firm domestic prices, and a stronger RMB against the US dollar, import cost pressure has eased somewhat. The price spread between Chinese and overseas markets has continued to repair, and the immediate import loss per mt stands at about 894 yuan.

Summary: Last Friday, the secondary aluminum alloy market overall continued to operate steadily, with mainstream producers' offers basically flat. The SMM ADC12 price was steady from the previous trading day at 24,100 yuan/mt. On the one hand, recent aluminum price fluctuations have been limited, the cost side lacks new drivers, while aluminum scrap supply remains tight, providing some support for secondary aluminum alloy prices; thus, producers are generally reluctant to adjust prices. On the other hand, end-use demand remains in the off-season, downstream order releases are insufficient, and purchases are mainly need-based. The market trading atmosphere is subdued, and some enterprises report that demand has weakened further compared with earlier periods. Against the backdrop of the tug-of-war between cost support and weak demand, the market as a whole maintains a cautious wait-and-see attitude. In the short term, ADC12 prices are expected to continue to consolidate steadily in a narrow range. The focus going forward will be on aluminum price movements, changes in aluminum scrap supply, and improvements in downstream orders.

[Data source statement: All data other than publicly available information are processed by SMM based on public information, market communication, and SMM's internal database models, and are for reference only. They do not constitute investment advice.]