Night Session Weakens, Cost-Supported Consolidation [SMM Cast Aluminum Alloy Morning Comment]

8.19 SMM Cast Aluminum Alloy Morning Comment

Futures: Overnight, the cast aluminum alloy 2610 contract opened at 23,025 yuan/mt, hit a high of 23,040 yuan/mt, dipped to a low of 22,920 yuan/mt, and closed at 22,965 yuan/mt, down 120 yuan/mt or 0.52% from the previous settlement price. After a brief small rise at the open of the night session, bulls ran out of steam and prices pulled back quickly, trading below the average price line for most of the session and consolidating on a subdued note overall. Trading volume for the period was 5,433 lots, down 803 lots from the previous session, and open interest was 18,720 lots, down 141 lots, as funds exited slightly.

Basis Daily: According to SMM data, the theoretical premium of SMM ADC12 spot price over the closing price of the most-traded cast aluminum alloy contract (AD2610) at 10:15 a.m. on August 18 was 965 yuan/mt.

Warrant Daily: SHFE data showed that on August 18, total registered warrants for cast aluminum alloy stood at 20,420 mt, up 695 mt from the previous trading day.

Aluminum Scrap: On Tuesday, SMM A00 spot aluminum closed at 23,900 yuan/mt, down 170 yuan/mt from the previous trading day. Domestic aluminum scrap market prices adjusted by different magnitudes, with active adjustments in Shanghai, Zhejiang, Jiangsu and other regions, while Guizhou, Anhui, central China and other areas held steady and took a wait-and-see stance.

Silicon Metal: On August 18, SMM non-oxygen blown #553 in east China held steady; oxygen-blown #553 held steady; #521 held steady; #441 held steady; #421 held steady; #421 for silicone use held steady; #3303 held steady.

Markets Outside China: Currently, overseas ADC12 offers are at $3,070–3,190/mt, with immediate import losses at around 1,200 yuan/mt.

Summary: On Tuesday, ADC12 market offers were mostly stable with a subdued bias, with most enterprises cutting prices by 100 yuan/mt, mainly affected by the pullback in futures and primary aluminum prices, weak end-use demand, and a slight decline on the cost side. However, the decline in aluminum scrap costs was relatively limited, and the cost side still provided some support. ADC12 prices are expected to continue to move sideways in the near term. On one hand, high prices for compliant raw materials, China's operating rates at lows compared to the same period, and the closure of the import window will continue to support prices from the cost and supply sides, limiting the downside room. On the other hand, amid the high-temperature off-season, end-use demand is weak, social inventories are building up again, and the spot market lacks demand drivers for sustained price rises. Therefore, a substantive improvement in end-use consumption is needed for prices to rise in the short term.

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