Aluminum scrap circulation is tight, and costs remain high [SMM Morning Comment on Cast Aluminum Alloy]

7.9 SMM Morning Comment on Cast Aluminum Alloy

Futures: Overnight, the most-traded ad2511 futures contract for cast aluminum alloy opened at 19,855 yuan/mt, with a high of 19,880 yuan/mt and a low of 19,810 yuan/mt. It closed at 19,875 yuan/mt, up 25 yuan/mt or 0.13% from the previous trading day. Trading volume stood at 590 lots, with open interest at 8,746 lots. Longs mainly increased their positions. 

Spot-Futures Price Spread Daily Report: According to SMM data, on July 8, 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 205 yuan/mt.

Aluminum Scrap: On Tuesday, the spot price of primary aluminum fell by 40 yuan/mt from the previous trading day. SMM A00 spot closed at 20,600 yuan/mt, and the overall market price of aluminum scrap continued to decline. By product, baled UBC prices fell by 50 yuan/mt MoM, following the aluminum price decline. By region, Shanghai, Jiangsu, Shandong, and other places closely followed the aluminum price trend, with price adjustments ranging from 50-100 yuan/mt. In Guizhou, Hunan, and other places, price adjustments lagged behind the aluminum price trend, with quotes remaining flat. In Jiangxi, aluminum scrap prices were collectively raised yesterday, with wrought aluminum alloy scrap and aluminum tense scrap prices increasing by 100 yuan/mt in total. The upward adjustment against the market trend further underscores the tightening of aluminum scrap supply. Recently, secondary aluminum scrap utilization enterprises in Fujian, Guangxi, and other places have sharply reduced their operating rates due to aluminum scrap shortages, with some even halting production for maintenance.

Overseas Market: The CIF import price of ADC12 remained at 2,450-2,480 US dollars/mt, with the import spot price hovering around 19,200 yuan/mt and the immediate import loss around 800 yuan/mt. The local tax-excluded price of ADC12 in Thailand was concentrated at 82-83 Thai baht/kg.

Inventory: According to SMM statistics, on July 8, the combined daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 24,246 mt, an increase of 1,528 mt from the previous trading day and 3,198 mt from the previous Tuesday.

Summary: On Tuesday, aluminum prices dropped back slightly, with SMM ADC12 prices holding steady at 20,000 yuan/mt. After July, factors such as the high-temperature off-season and high aluminum prices have continued to impact downstream orders, with some downstream enterprises initiating production reduction modes. Although futures-to-spot traders have been actively inquiring and trading volume of delivery brands has increased, the end-use consumption market remains sluggish, posing a key resistance to price increases. However, due to factors such as reduced imports and a decline in dismantling volumes caused by high temperatures, the tight supply of secondary aluminum raw materials is expected to persist, continuing to support ADC12 costs. Faced with the dual pressures of raw material supply shortages and weak market demand, some secondary aluminum manufacturers have temporarily halted their furnaces for maintenance or reduced their operating rates. Overall, the strong cost support and weak demand continue to battle it out, with ADC12 prices expected to maintain a weak and narrowly fluctuating pattern in 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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