Primary Aluminum Dropped Sharply, Market Showed Significant Willingness to Follow the Decline [SMM Cast Aluminum Alloy Morning Comment]

5.8 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded aluminum alloy contract 2606 closed at 22,920 yuan/mt overnight, up 45 yuan from the previous trading day, a gain of 0.2%. Both trading volume and open interest decreased simultaneously, indicating that both bulls and bears are currently in a wait-and-see mode. The sustainability of the downtrend is questionable, and in the short term, the market is likely to enter a consolidation or weak rebound phase. Prices are in a weak recovery stage following the decline. Indicators suggest short-term rebound momentum, but resistance from moving averages above remains strong. Key focus is on the validity of the 22,700 support level — if breached, downside room opens up.

Spot-futures price spread daily report: According to SMM data, on May 7, the SMM ADC12 spot price was at a theoretical premium of 765 yuan/mt over the most-traded cast aluminum alloy contract (AD2606) closing price at 10:15 AM.

Warrant daily report: SHFE data showed that on May 7, total registered warrants for cast aluminum alloy stood at 33,431 mt, down 393 mt from the previous trading day. Specifically, Shanghai had a total registered volume of 1,999 mt (unchanged from the previous trading day); Guangdong had 10,457 mt (down 243 mt); Jiangsu had 5,999 mt (unchanged); Zhejiang had 9,687 mt (unchanged); Chongqing had 4,143 mt (unchanged); Sichuan had 1,146 mt (down 150 mt).

Aluminum scrap: Yesterday, A00 aluminum prices fell 480 yuan/mt from the previous trading day, and aluminum scrap market prices generally followed with declines of 200-300 yuan/mt. Affected by the Labour Day holiday, most aluminum scrap yards arranged 1-2 days off. As of that day, the pace of aluminum scrap purchases remained stable compared to April overall. In the first week after the Labour Day holiday, China's aluminum scrap market is expected to remain in the doldrums at elevated levels, with shredded aluminum tense scrap (priced based on aluminum content) mainstream range expected to stay around 20,700-21,300 yuan/mt (tax-exclusive). Supply-side policy constraints continue, and imported aluminum scrap volumes are expected to decline, weakening supply replenishment. However, as the peak season effect winds down, demand for aluminum tense scrap remains sluggish, and incremental end-user orders are expected to be limited. In the short term, attention should be paid to the progress of US-Iran negotiations, the implementation of invoice and reverse invoicing policies, and the post-holiday order recovery of scrap utilization enterprises.

Silicon metal: After the Labour Day holiday, the silicon market trended stronger, with the most-traded futures contract breaking through resistance to rise above 9,000 yuan/mt. Silicon suppliers tested higher spot prices multiple times with small increments, with east China #553 silicon quotes rising above 9,300 yuan/mt. On the futures market, the SI2609 contract closed at 9,080 yuan/mt on Thursday, up 285 yuan/mt WoW, with an intraday high of 9,180 yuan/mt. This round of futures strength was mainly driven by macro and capital momentum. From late April to early May, silicon enterprises hedged in batches at high levels and increased basis selling, with ownership gradually shifting to futures-spot traders. Rigid demand provided support, and spot prices passively followed the uptrend.

Markets outside China: On the import front, ex-China ADC12 quotes remained at elevated levels near $3,400/mt, with per-mt instant import losses widening to above 3,000 yuan, and the theoretical import window remaining closed.

Summary: Yesterday, the ADC12 spot market also fluctuated downward, with mainstream enterprises generally lowering quotes by 200-300 yuan/mt, and bearish sentiment was prevalent. On one hand, the sharp pullback in futures exerted strong downward pressure on the spot market, prompting enterprises to actively lower quotes. On the other hand, persistently weak downstream consumption further eroded market confidence. Currently, although the cost side provides some price support, under the influence of insufficient demand and pessimistic market expectations, ADC12 prices still face certain downward pressure in the short term, and the market continues to remain in the doldrums.

[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.]