Rising costs push up spot price of ADC12, with limited upside room in the short term [SMM Morning Comment on Cast Aluminum Alloy]

SMM Morning Comment on Cast Aluminum Alloy, June 13

Futures Market: Overnight, the most-traded AD2511 futures contract for cast aluminum alloy opened at 19,455 yuan/mt, with a high of 19,475 yuan/mt, a low of 19,330 yuan/mt, and closed at 19,370 yuan/mt. This represented a decrease of 90 yuan/mt or 0.46% from the previous close. Trading volume reached 5,361 lots, and open interest stood at 10,141 lots.

Spot-Futures Price Spread Report: According to SMM data, on June 12, the SMM ADC12 spot price was at a theoretical premium of 525 yuan/mt over the closing price of the most-traded cast aluminum alloy futures contract (AD2511) at 10:15 a.m.

Aluminum Scrap Market: On Thursday, spot primary aluminum prices rose by 250 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,650 yuan/mt, and aluminum scrap market prices generally followed suit. With the onset of the off-season in June, downstream scrap utilization enterprises experienced sluggish order releases, with procurement mainly driven by immediate needs. Regionally, Shanghai, Jiangsu, Shandong, Jiangxi, and other regions closely tracked aluminum prices, with price adjustments ranging from 200-250 yuan/mt. In contrast, Hunan, Hubei, Foshan, Guizhou, and other regions lagged behind aluminum price movements, with adjustments ranging from 100-150 yuan/mt. By product, prices for baled UBC and mixed aluminum extrusion scrap free of paint increased slightly by 100-150 yuan/mt, while prices for bare bright aluminum wire and shredded aluminum tense scrap rose by 200 yuan/mt. It is expected that the aluminum scrap market will continue to fluctuate at highs, with the tight supply of aluminum tense scrap remaining unchanged and prices well supported. Wrought aluminum alloy scrap will continue to fluctuate rangebound alongside primary aluminum.

Overseas Markets: On June 12, the CIF import price of ADC12 rose again to $2,410-2,450/mt, and the import spot price increased by 100 yuan/mt to around 19,200 yuan/mt. Due to overseas price increases outpacing the domestic market, immediate import losses widened again to 500-700 yuan/mt. In Thailand, the local tax-excluded quote for ADC12 rose to 81-82 Thai baht/kg.

Inventory: According to SMM statistics, on June 12, the total social inventory of secondary aluminum alloy ingots in major domestic consumer regions was 18,013 mt, an increase of 1,647 mt from the previous Thursday. Among them, the Ningbo region saw an increase of 1,052 mt, and the Foshan region increased by 730 mt from the previous Thursday, making them the main contributors to the increase.

Summary: On Thursday, the SMM A00 aluminum price rose by 250 yuan/mt from the previous trading day to 20,650 yuan/mt, while the domestic SMM ADC12 price increased by 100 yuan/mt to the range of 19,900-20,100 yuan/mt. On the cost side, aluminum scrap prices closely followed the rise in aluminum prices during the week, leading to a continuous increase in production costs for secondary aluminum enterprises and exacerbating cost-side pressures. However, the downstream consumer market remained sluggish, with insufficient procurement enthusiasm. In the early stages of futures listing, market sentiment was characterized by a wait-and-see approach, with most participants still in the stage of waiting for trading opportunities. Driven by the rapid increase in cost-side pressures, ADC12 market quotes generally rose by 100 yuan/mt yesterday. However, the persistent weakness in end-use demand still poses a significant constraint on the upside room for ADC12 prices. It is expected that the short-term price of ADC12 will mainly undergo narrow adjustments, and the discount pattern relative to A00 will continue.

[The information provided is for reference only. This article does not constitute direct advice for investment research and decision-making. Clients should make cautious decisions and should not replace their independent judgment with this information. Any decisions made by clients are not related to SMM.]

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