Geopolitical Disruptions Pushed Up Costs, Weak Demand Constrained Gains [SMM Cast Aluminum Alloy Morning Comment]

4.15 SMM Cast Aluminum Alloy Morning Comment

Futures: The overnight aluminum alloy 2606 contract overall moved sideways and was in the doldrums, with prices running below the moving average throughout, under pressure. After the night session opened, prices quickly dipped to a low of 23,605 yuan/mt, then rebounded slightly to recover. During the session, prices seesawed around the previous settlement line. In the evening, prices attempted to test the moving average resistance but failed to break through effectively, pulling back from highs under pressure. Night session open interest edged up slightly while trading volume contracted somewhat, indicating cautious capital sentiment. On the daily chart, prices consolidated around the medium-term moving average. The KD indicator was in a relatively high range. In the short term, there is notable resistance near 23,800 yuan/mt above, while the moving averages below provide basic support. Futures prices are temporarily in a range-bound consolidation pattern.

Basis daily report: According to SMM data, on April 14, the SMM ADC12 spot price theoretical premium over the most-traded cast aluminum alloy contract (AD2606) at the 10:15 closing price narrowed to 735 yuan/mt.

Warrant daily report: SHFE data showed that on April 14, total registered warrants for cast aluminum alloy stood at 30,434 mt, down 213 mt from the previous trading day. Specifically, Shanghai registered 1,822 mt (down 90 mt), Guangdong registered 11,846 mt (down 153 mt), Jiangsu registered 3,938 mt (up 61 mt), Zhejiang registered 8,019 mt (unchanged), Chongqing registered 3,603 mt (down 31 mt), and Sichuan registered 1,206 mt (unchanged).

Aluminum scrap: The US-Iran conflict disrupted passage through the Strait of Hormuz, boosting capital sentiment and pushing up aluminum prices. On Tuesday, spot primary aluminum surged 300 yuan/mt from the previous trading day, and the aluminum scrap market generally followed suit. Currently, the tightening regulatory stance on the "reverse invoicing" policy remains unchanged, with compliance costs in the aluminum scrap recycling chain staying elevated, and actual available invoiced supply remaining tight. Demand side, the divergence in shipments between aluminum tense scrap and wrought aluminum alloy scrap intensified. For aluminum tense scrap materials such as shredded aluminum tense scrap and ADC12 aluminum shavings, downstream scrap utilization enterprises including secondary alloy producers mostly maintained purchasing as needed with low inventory operations. For wrought aluminum alloy scrap materials such as baled UBC and 5-series/3-series plate off-cuts, downstream recycled aluminum plate/sheet and strip enterprises are in peak production season with relatively high stockpiling enthusiasm. However, overall, high prices combined with wild swings in aluminum prices continued to suppress scrap utilization enterprises' purchasing enthusiasm. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 3,023 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,733 yuan/mt.

Silicon metal: At the beginning of the week, futures prices saw wider fluctuations driven by market news. As the news was debunked, futures prices weakened again. Yesterday, SMM east China oxygen-blown #553 silicon was at 8,900-9,100 yuan/mt, and #441 silicon was at 9,100-9,300 yuan/mt. Yesterday, the most-traded SI contract closed at 8,320 yuan/mt, down 95 yuan/mt from the previous day and up 70 yuan/mt from Monday. Production side, recently a few northern silicon enterprises had small amounts of capacity temporarily halted or under maintenance, which affected total silicon metal production. Most other silicon enterprises' operations were basically stable.

Markets outside China: Currently, ex-China ADC12 quotes rose to the $3,340-3,360/mt range, with immediate import losses continuing at around 2,000 yuan.

Summary: On Tuesday, the ADC12 market edged up, with most enterprises raising prices by 100 yuan/mt. Some enterprises, driven by bullish expectations, expanded the increase to 200 yuan/mt. In terms of driving factors, stronger primary aluminum prices pushed up the cost side. However, from demand side feedback, downstream purchasing sentiment remained cautious, with no significant increase in transaction volumes, and the market was still dominated by rigid demand. Against the backdrop of coexisting cost-push and demand constraints, ADC12 prices are expected to continue to hold up well with a fluctuating trend in the short term. Going forward, attention should be paid to the sustainability of futures gains and demand side follow-through.

[Data source disclaimer: Data other than publicly available information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.]