Futures Prices Retreat After Rapid Rise, Market Divergence at High Levels Intensifies [SMM Cast Aluminum Alloy Morning Comment]

3.18 SMM Morning Comment on Cast Aluminum Alloy

Futures: Overnight, the aluminum alloy ad2604 contract opened higher and then fluctuated downward, opening at 23,770 yuan/mt. It rose to 23,820 yuan/mt during the session, then pulled back under pressure, with the low touching 23,525 yuan/mt, and closed at 23,645 yuan/mt late in the session, down 80 yuan/mt, or 0.34%, from the previous settlement price. Open interest edged up by 6 lots to 5,304 lots, while trading volume was 2,417 lots. Wait-and-see sentiment was relatively strong among funds, and market divergence at high levels intensified. Overall, the night session showed a pattern of retreat after rapid rise and in-the-doldrums fluctuations. In the short term, attention should be paid to whether support around 23,530 yuan/mt is effective.

Spot-Futures Price Spread Daily: According to SMM data, on March 17, the theoretical premium of the SMM ADC12 spot price over the 10:15 closing price of the most-traded cast aluminum alloy contract (AD2604) was 1,225 yuan/mt.

Warrant Daily: SHFE data showed that as of March 17, the total registered volume of cast aluminum alloy warrants was 53,078 mt, down 362 mt from the previous trading day. Among them, the total registered volume in Shanghai was 4,508 mt, down 92 mt from the previous trading day; Guangdong was 18,792 mt, down 300 mt; Jiangsu was 6,818 mt, up 392 mt; Zhejiang was 17,338 mt, down 332 mt; Chongqing was 4,114 mt, up 0 mt; and Sichuan was 1,508 mt, down 30 mt.

Aluminum scrap: Yesterday, spot primary aluminum rose 110 yuan/mt from the previous trading day, while the aluminum scrap market was mainly stable with slight follow-up gains. In terms of the price difference between A00 aluminum and aluminum scrap, on March 17, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,625 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,711 yuan/mt. The aluminum scrap market is expected to maintain high-level strength and hold up well this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) hovering around 20,400-21,000 yuan/mt (ex-tax). Primary aluminum will likely remain the core driver under the impact of geopolitical developments, with heightened risk of price fluctuations. On the supply side, cargo availability is being released steadily, but ongoing policy uncertainty continues to suppress circulation efficiency. On the demand side, the pace of recovery in the peak season has been relatively slow, while high prices and wild swings continue to curb purchase willingness. In the short term, close attention should be paid to primary aluminum trends amid developments in geopolitical conflicts, the recovery of downstream orders, and the implementation of recycled recovery policies, while staying alert to the risk of a sharp pullback from high levels.

Silicon metal: Spot silicon metal prices were in a stalemate and basically stable, while futures prices were in the doldrums yesterday. Yesterday, SMM east China oxygen-blown #553 silicon was 9,100-9,300 yuan/mt, and #441 silicon was 9,300-9,600 yuan/mt, flat from the previous day. Yesterday, the futures market fluctuated around 8,550-8,650 yuan/mt and closed at 8,560 yuan/mt late in the session, with the center moving lower than the previous day. Downstream users mainly purchased at low prices on an as-needed basis, while silicon metal prices maintained a fluctuating trend, with attention on macro disturbances to prices.

Markets outside China: Overseas ADC12 quotes were around $3,400/mt, and immediate import losses continued to hover around 2,000 yuan, keeping the import window closed.

Summary: On Tuesday, the overall ADC12 market was largely stable, with a few enterprises slightly raising their offers. Driven by a slight strengthening in aluminum scrap prices, cost support for some enterprises increased somewhat. However, due to limited fluctuations in aluminum prices and mediocre downstream demand, the market as a whole still lacked momentum for price adjustments. Overall, ADC12 prices are expected to continue to hover at highs in the short term. Going forward, close attention should be paid to the pace of downstream order releases, potential pressure from the supply recovery process, and the impact of changes in the Middle East situation on aluminum price trends.

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