[SMM Analysis: Supply Increase Combined with Slow Recovery Weakens ADC12's Upward Momentum, Price Spread with Primary Aluminum Continues to Narrow] Looking ahead to March, the approaching traditional peak consumption season is expected to drive marginal improvement in demand, but the actual recovery strength of end-user orders still needs to be verified, and the market's focus will shift to the pace of demand recovery.
SMM March 1 News: In the first week after the holiday, the most-traded SHFE aluminum contract surged strongly, then fluctuated within a high range of 20,500-21,000 yuan/mt. As of February 28, the most-traded SHFE aluminum 2504 contract closed at 20,640 yuan/mt. In the spot market, on February 28, the SMM A00 price rose by 480 yuan/mt from the end of last month to close at 20,600 yuan/mt. The average spot aluminum price for February (calendar month) recorded 20,517 yuan/mt, up 2.4% MoM.
For ADC12 prices, February showed a slow upward trend followed by a rapid decline, with the premium against A00 prices narrowing continuously. As of February 28, quotes from large domestic secondary aluminum enterprises increased by 100 yuan/mt from the end of January to 21,100-21,300 yuan/mt, while prices from small and medium-sized plants remained flat at 20,600-20,800 yuan/mt. Below is the chart showing the price trends and price spread between A00 and ADC12 over recent years:
Cost side, for aluminum scrap, the Chinese New Year holiday at the beginning of the month caused upstream and downstream operations to halt, leading to sluggish transactions. Secondary aluminum plants mainly consumed pre-holiday inventories. As primary aluminum prices rose, the market had not yet recovered, resulting in a slight expansion of the price difference between primary metal and scrap. With the resumption of work and production around the Lantern Festival, the market gradually warmed up in mid-month. Domestic new scrap supply recovered, supplemented by increased shipments from Southeast Asia, leading to improved market circulation. Secondary aluminum plants experienced slightly eased raw material procurement, but overall costs remained high. Below is the chart showing the price difference between primary metal and scrap:
Silicon side, silicon prices trended downward steadily in February. As of February 28, the price of above-standard #553 silicon fell by 200 yuan/mt from the end of last month to 10,650 yuan/mt, with the aluminum-silicon price spread exceeding 10,000 yuan/mt. Currently, silicon metal supply continues to increase, with new production resuming and being released. In the short term, spot prices remain under pressure as industry inventory cannot be effectively reduced, and market sentiment remains pessimistic. Spot silicon metal prices are expected to fluctuate downward in the near term. Below is the chart showing the price trends of silicon and aluminum:
Overall, the weighted average cost of the ADC12 industry in February increased by 1.3% compared to January, mainly due to higher aluminum scrap and copper costs, while silicon costs continued to decline slightly. The theoretical profitability of the industry narrowed in February. Below is the chart showing the national average profitability of ADC12:
Demand side, downstream demand in the secondary aluminum market remained weak in February, dragged by the slow pace of post-holiday resumption. Orders from die-casting enterprises recovered relatively slowly, with insufficient release of terminal orders in sectors such as automobiles. Coupled with intensified market caution due to aluminum price fluctuations, procurement was mainly limited to restocking for immediate needs. The demand side lacked effective drivers, leading to a lackluster rise in ADC12 prices.
Supply side, the operating rate of the secondary aluminum industry in February slightly declined MoM. Production was significantly affected by the Chinese New Year holiday, with most secondary aluminum plants shutting down furnaces and taking holidays at the beginning of the month. The post-holiday resumption was slow, and the fewer working days in February led to a general decline in production. After the Lantern Festival, the operating rate of secondary aluminum plants returned to normal levels. As market supply gradually loosened, plant and social inventories continued to accumulate, with some enterprises offering discounts to stimulate sales, intensifying price competition.
On the import side, overseas ADC12 quotes climbed from $2,420-2,450/mt at the beginning of the month to $2,480-2,500/mt by month-end. The import immediate profit and loss shifted from break-even at the beginning of the month to a slight loss by month-end. Although the closure of the import window eased external supply pressure, it failed to reverse the domestic supply-demand imbalance. Below is the chart showing the profitability of imported ADC12:
Looking ahead to March, the approaching traditional peak consumption season is expected to marginally improve demand, but the actual recovery of terminal orders remains to be verified. The market's focus will shift to the pace of demand recovery. Cost side, aluminum scrap prices are expected to remain resilient, supported by high primary aluminum prices and tight supply. In the short term, ADC12 prices may continue a sideways movement. 》Click to view the SMM Metal Industry Chain Database
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Mar 1, 2025 16:22
