SHFE Aluminum Fluctuates at Highs, Post-Holiday Consumption Recovery Slow [SMM Cast Aluminum Alloy Morning Comment]

2.27 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded aluminum alloy 2604 futures contract closed at 22,670 yuan/mt overnight, down 55 yuan/mt or 0.24% from the previous trading day. Trading volume was 3,306 lots, and open interest was 8,923 lots, a decrease of 407 lots. After hitting a high of 22,920 yuan earlier, the contract experienced a pullback. The current candlestick formed a bearish candlestick with a long upper shadow, indicating heavy selling pressure above. Following the rebound from the low of 21,875 yuan, the contract is currently in a phase of fluctuating at highs with a pullback. The KDJ indicator shows overbought conditions and has turned downward, suggesting further adjustment is needed in the short term.

Spot-Futures Price Spread Report: According to SMM data, on February 26, the SMM ADC12 spot price was at a theoretical premium of 1,135 yuan/mt to the closing price of the most-traded cast aluminum alloy futures contract (AD2604) at 10:15.

Warrant Report: SHFE data showed that on February 26, the total registered warrant volume for cast aluminum alloy was 66,174 mt, down 907 mt from the previous trading day. By region: Shanghai total registered volume was 6,490 mt, unchanged; Guangdong total registered volume was 22,150 mt, down 546 mt; Jiangsu total registered volume was 8,889 mt, down 272 mt; Zhejiang total registered volume was 22,698 mt, down 59 mt; Chongqing total registered volume was 4,594 mt, down 30 mt; Sichuan total registered volume was 1,353 mt, unchanged.

Aluminum Scrap Side: Yesterday, the spot price of primary aluminum increased compared to the previous day's quote, with the SMM A00 spot price closing at 23,520 yuan/mt. Aluminum scrap market prices generally followed the increase. Baled UBC was quoted in the range of 17,000-17,500 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 19,200-19,900 yuan/mt (ex-tax). Regarding the price difference between A00 aluminum and aluminum scrap: on February 26, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,448 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,661 yuan/mt. The aluminum scrap market is expected to hover at highs next week, with shredded aluminum tense scrap (priced based on aluminum content) likely to trade mainly within the range of 19,000-19,600 yuan/mt (ex-tax). Supply side, scrap yards are gradually resuming full operations, and the release of supply is expected to increase, but constraints from recycling policies on liquidity persist. Demand side, the resumption pace of downstream enterprises is accelerating, and restocking demand is expected to be released slowly. Overall, the tug-of-war between sellers and buyers continues. Market trading atmosphere is expected to gradually recover but remain relatively sluggish. Close attention should be paid to the progress of downstream resumption, the price trend of primary aluminum, and changes in recycling policies, while remaining cautious of price fluctuation risks.

Silicon Metal Side: Price: During the first working week after the Chinese New Year holiday, the most-traded silicon metal futures contract traded between 8,330 and 8,495 yuan/mt. Most silicon enterprises maintained a wait-and-see attitude after the holiday, keeping their offers stable. Futures prices were low, and trading firms engaging in both spot and futures markets quoted actively. Downstream users of silicon metal mainly inquired and restocked based on demand. Silicon metal prices fluctuated at lows. Inventory: Social inventory: SMM statistics show that as of February 26, the total social inventory of silicon metal in major regions was 560,000 mt, an increase of 3,000 mt WoW before the Chinese New Year. (Excluding Inner Mongolia, Ningxia, Gansu, etc.).

Overseas market: On the import side, although overseas ADC12 offers continued to rise to $2,900-2,950/mt, supported by the recent strengthening of the yuan against the US dollar, import arbitrage remained profitable.

Summary: Spot side, A00 aluminum prices rebounded by 140 yuan/mt to 23,520 yuan/mt compared to the previous trading day, while SMM ADC12 prices rose slightly by 50 yuan/mt to 23,800 yuan/mt. Boosted by stronger futures, market sentiment improved slightly. However, secondary aluminum enterprises overall maintained cautious sentiment regarding following the price increase, mostly keeping stable offers or raising prices by no more than 100 yuan/mt. Post-holiday downstream consumption recovery pace was relatively slow, with downstream users conducting just-in-time procurement; some enterprises still focused on digesting inventories. Overall market trading atmosphere was sluggish. Short-term, ADC12 prices are likely to continue moving sideways in the initial post-holiday period. Medium-term trends still require monitoring the supply-demand balance as production resumptions are gradually realized, and the impact of primary aluminum price movements on aluminum scrap costs.

[Data source statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and SMM's internal database model, for reference only and do not constitute decision-making advice.]