Overnight Narrow Rebound in Aluminum Alloy Futures, Off-Season Tug-of-War between Sellers and Buyers Continues [SMM Cast Aluminum Alloy Morning Comment]

7.22 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2609 contract opened higher in the night session and then consolidated sideways, opening at 23,040 yuan/mt, with a session high of 23,070 yuan/mt, a session low of 22,955 yuan/mt, and closing at 22,985 yuan/mt, up 25 yuan/mt or 0.11% from the previous settlement price. After a slight rally at the open, it came under pressure and pulled back, with prices fluctuating around the average price line throughout the session. The tug-of-war between longs and shorts was relatively balanced, with trading volume at 2,103 lots and open interest edging up by 60 lots.

Basis Daily: According to SMM data, on July 21, the theoretical premium of SMM ADC12 spot price over the closing price of the most-traded cast aluminum alloy contract (AD2609) at 10:15 am was .

Warrant Daily: SHFE data showed that on July 21, total registered warrants for cast aluminum alloy stood at 18,455 mt, down 243 mt from the previous trading day.

Aluminum scrap: Yesterday SMM A00 spot aluminum closed at 23,080 yuan/mt, down 110 yuan/mt from the previous trading day, while the aluminum scrap market remained largely stable. Regarding price spreads, on July 21, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,021 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 707 yuan/mt, both still at extremely low levels. The aluminum scrap market is expected to remain in a high-level sideways rangebound pattern. On the supply side, the reverse invoicing policy constraint is unlikely to reverse in the short term, and the tight supply of ticketed aluminum scrap will persist; on the import side, multiple bearish factors will gradually come into play in the coming months, and overseas high-quality scrap supply will remain low. On the demand side, amid the deepening off-season, downstream operating rates remain low, end-user orders are hard to improve materially, and scrap utilization enterprises continue their strategy of purchasing as needed, making it difficult for purchasing sentiment to improve significantly.

Silicon metal: On July 21, SMM east China non-oxygen blown #553 prices held steady; oxygen-blown #553 prices held steady; #521 prices held steady; #441 prices held steady; #421 prices held steady; #421 for silicone held steady; #3303 prices held steady. Some silicon prices in southern China, Huangpu port, Tianjin, Sichuan, Kunming, northwest China, and Xinjiang moved lower.

Markets outside China: At present, overseas ADC12 offers have pulled back slightly to the $3,050–3,160/mt range. Affected by the slight pullback in overseas offers, firm domestic prices, and the strengthening of the yuan against the US dollar, import cost pressure has eased somewhat, and the price spread between Chinese and overseas markets has continued to recover, with immediate import loss at around 821 yuan/mt.

Summary: On Tuesday, the ADC12 market remained in the doldrums, with offer centers shifting slightly lower. Fundamentally, the pullback in aluminum prices weakened cost support; meanwhile, the off-season effect continued to deepen, downstream maintained just-in-time procurement, and overall trading was sluggish. Pressured by both weak demand and easing costs, market offers came under pressure and pulled back. However, some enterprises, considering high costs, still held prices firm with a wait-and-see sentiment. In the near term, ADC12 prices are expected to maintain a sideways rangebound pattern. Going forward, close attention should be paid to primary aluminum price moves, aluminum scrap cost fluctuations, and the substantial recovery of end-user orders.

[Data Source Statement: All data other than publicly available information is derived from publicly available information, market communications, and SMM’s internal database models, processed by SMM, for reference only and does not constitute investment advice.]