The most-traded contract rose slightly overnight, with intensified competition between cost support and weak demand [SMM Morning Comment on Cast Aluminum Alloy]

7.8 SMM Morning Comment on Cast Aluminum Alloy

Futures Market: Overnight, the most-traded AD2511 cast aluminum alloy futures contract opened at 19,755 yuan/mt, hitting a bottom of 19,750 yuan/mt, reaching a peak of 19,810 yuan/mt, and finally closing at 19,785 yuan/mt, up 35 yuan/mt or 0.18% from the previous trading day. Trading volume stood at 734 lots, with open interest at 8,517 lots, primarily driven by an increase in long positions. 

Spot-Futures Price Spread Daily Report: According to SMM data, on July 7, the theoretical premium of SMM ADC12 spot price over the closing price of the most-traded cast aluminum alloy futures contract (AD2511) at 10:15 a.m. narrowed to 260 yuan/mt.

Aluminum Scrap Market: Yesterday, the spot price of primary aluminum fell by 130 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,640 yuan/mt. The overall aluminum scrap market prices corrected downward. Amid the traditional off-season, downstream scrap utilization enterprises faced weak order releases, with procurement primarily driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,200 to 15,700 yuan/mt (tax-exclusive), while the quoted price for shredded aluminum tense scrap ranged from 15,800 to 17,300 yuan/mt (tax-exclusive). By product, baled UBC aluminum scrap prices fell by 100 yuan/mt MoM, following the decline in aluminum prices. Regionally, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminum price movements, with price adjustments ranging from 100 to 150 yuan/mt. In contrast, Jiangxi, Foshan, Hunan, and other regions lagged behind aluminum price movements, with quoted prices remaining unchanged from the previous trading day.

Overseas Market: The CIF import price of ADC12 remained at $2,450-$2,480/mt, with the import spot price hovering around 19,200 yuan/mt, resulting in an immediate import loss of approximately 800 yuan/mt. In Thailand, the local tax-exclusive quoted price for ADC12 was concentrated at 82-83 Thai baht/kg.

Inventory: According to SMM statistics, on July 7, the combined daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 22,718 mt, up 729 mt from the previous trading day and 2,957 mt from the previous Monday.

Summary: On Monday, aluminum prices extended their decline, with SMM ADC12 prices falling by 100 yuan/mt to 20,000 yuan/mt. After July, factors such as the high-temperature off-season and elevated aluminum prices continued to impact downstream orders, prompting some downstream enterprises to initiate production cuts. Despite active inquiries from futures-to-spot traders and an increase in trading volume for delivery brands, the sluggish end-use consumption market remained a key obstacle to price increases. However, due to factors such as reduced imports and a decline in dismantling volumes caused by high temperatures, the shortage of secondary aluminum raw materials is expected to persist, continuing to support ADC12 costs. Faced with the dual pressures of raw material supply deficits and weak market demand, some secondary aluminum manufacturers have temporarily halted furnace operations for maintenance or reduced their operating rates. Overall, the strong cost support and weak demand continue to engage in a tug-of-war, with ADC12 prices expected to maintain a weak and narrowly fluctuating pattern throughout July.

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

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