Aluminum Alloy Contracts Mild Rebound, Move Sideways Amid Cost-Demand Game [SMM Cast Aluminum Alloy Morning Comment]

8.26 SMM Cast Aluminum Alloy Morning Comment

Futures: Overnight, the most-traded aluminum alloy contract 2610 opened at 23,150 yuan/mt, reached a high of 23,375 yuan/mt and a low of 23,070 yuan/mt, and closed at 23,265 yuan/mt, up 185, or +0.80%. Trading volume was 4,007 contracts, up 335 lots MoM, with a slight increase and mildly expanding activity. Open interest was 15,579 contracts, down 1,413 lots MoM, a notable decline. During the rebound, old bulls took profits and exited, while bears stopped losses. There was no large-scale opening of new long positions, indicating a repair rally driven by existing funds and insufficient incremental capital.

Spot-Futures Spread Daily: According to SMM data, on August 25, the spot price of SMM ADC12 was at a theoretical premium of 820 yuan/mt to the 10:15 closing price of the most-traded cast aluminum alloy futures contract (AD2610).

Warrant Daily: According to SHFE data, on August 25, total registered warrants of cast aluminum alloy were 20,147 mt, down 61 mt from the previous trading day. Among them, Shanghai region total registration was 1,625 mt, unchanged from the previous trading day; Guangdong region total registration was 1,188 mt, down 61 mt; Jiangsu region total registration was 5,946 mt, unchanged; Zhejiang region total registration was 8,319 mt, up 30 mt; Chongqing region total registration was 2,284 mt, down 30 mt; Sichuan region total registration was 785 mt, unchanged.

Aluminum scrap side: Yesterday, SMM A00 spot aluminum price closed at 23,740 yuan/mt, down 60 yuan/mt from the previous trading day. The domestic aluminum scrap market prices were generally stable with a wait-and-see stance. Against the backdrop of continuously rising primary aluminum prices, the fluctuation range of aluminum scrap was relatively limited, and the price transmission mechanism was blocked. However, with the recent pullback in primary aluminum, the downward resistance of aluminum scrap provided an opportunity for narrowing the price spread between A00 aluminum and aluminum scrap. In terms of price spread, on August 25, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,255 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,034 yuan/mt. It is expected that the aluminum scrap market this week will continue the narrow sideways pattern of demand suppression and cost support. Currently at the tail end of the traditional off-season, it is difficult for downstream terminal orders to see a substantial breakout. Scrap utilization enterprises continue to adopt a purchasing-as-needed strategy, with cautious procurement sentiment, and the pre-season effect is not yet significant, leaving subsequent order intake to be monitored. The main operating range of shredded aluminum tense scrap (priced based on aluminum content) is expected to fluctuate around 19,900-20,700 yuan/mt.

Silicon metal side: Prices: Yesterday, SMM east China oxygen-blown #553 silicon was around 9,300-9,500 yuan/mt, and #441 silicon was around 9,500-9,600 yuan/mt. Recently, the market mainly traded on expectations of production cuts by large plants in Xinjiang at month-end. Market sentiment was bullish but views remained cautious, with downstream users purchasing as needed. Production: In early August, production of silicon metal in multiple producing areas such as Gansu and Sichuan saw cuts. August silicon metal production decreased significantly MoM from July. At the end of August, large north China plants have a production cut plan, and attention should be paid to its implementation.

Markets outside China: On the import side, overseas ADC12 quotations were temporarily stable at $3,050-3,190/mt. The direct import loss remained at around 900 yuan/mt. The import window has not yet opened, and overseas supply replenishment is limited.

Summary: Yesterday, ADC12 market quotations were generally stable, with SMM ADC12 price unchanged from the previous trading day at 23,900 yuan/mt. Currently, the demand side has not shown significant improvement, and price increases lack sufficient trading support. At the same time, the cost side still provides some support, limiting further room for price declines. The overall market is in a state of difficulty in rising or falling, with a strong wait-and-see sentiment. However, as the traditional peak season gradually approaches, some enterprises have reported marginal improvement in recent orders, and market expectations for subsequent demand recovery have warmed up. In the short term, ADC12 prices are expected to maintain a narrow sideways consolidation pattern, with subsequent focus on cost-side changes and end-use demand improvement.

[Data Source Statement: Other than publicly available information, all data are processed by SMM based on public information, market communication, and SMM's internal database models, for reference only and do not constitute decision-making advice.]