The most-traded SHFE aluminum contract increased in positions and rose overnight, with short-term import losses widening [SMM Morning Comment on Cast Aluminum Alloy]

SMM Morning Comment on Cast Aluminum Alloy on July 7.1

Futures Market: Overnight, the most-traded AD2511 cast aluminum alloy futures contract opened at 19,820 yuan/mt, reaching a high of 19,960 yuan/mt and a low of 19,780 yuan/mt, before closing at 19,945 yuan/mt, up 115 yuan/mt or 0.58% from the previous trading day. Trading volume stood at 1,930 lots, with open interest at 8,658 lots, primarily driven by longs increasing their positions.  

Spot-Futures Price Spread Daily Report: According to SMM data, on July 9, 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 130 yuan/mt.

Industry Updates: (1) As announced by SHFE, as of the close on July 9, the cast aluminum alloy futures had been trading for 22 consecutive trading days, with a cumulative trading volume of 205,700 lots and open interest of 10,200 lots after the close on that day, equivalent to a spot cargo scale of 102,000 mt, accounting for approximately 27% of the domestic monthly consumption of cast aluminum alloy. The cast aluminum alloy options had a cumulative trading volume of 41,500 lots and open interest of 6,000 lots after the close on that day. Moving forward, SHFE will continue to intensify market cultivation efforts, persistently carry out market promotion and training activities, facilitate the functioning of the market, and ensure the smooth first delivery of cast aluminum alloy futures. Meanwhile, SHFE will closely monitor market operations and optimize the rules for cast aluminum alloy futures in a timely manner based on feedback from all market participants, striving to meet the risk management needs of the aluminum industry and better serve and lead the development of the real economy. (2) On July 9, the Ministry of Industry and Information Technology launched an "Online Window for Reporting Issues Related to Key Automakers' Compliance with Payment Cycle Commitments," accepting reports from small and medium-sized enterprises regarding key automakers' failure to comply with payment cycle commitments and inadequate implementation of the "Regulation on Ensuring Payments to Small and Medium-Sized Enterprises."

Aluminum Scrap Market: On Wednesday, the spot price of primary aluminum rose by 60 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,660 yuan/mt. Aluminum scrap market prices generally continued to rebound. By product, baled UBC prices rebounded by 50 yuan/mt from the previous day, following the upward trend in aluminum prices. By region, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminum price movements, with price adjustments ranging from 50-100 yuan/mt. In Guizhou, Hunan, and other regions, price adjustments lagged behind aluminum price movements, with quotes remaining flat. After collectively raising aluminum scrap prices on Tuesday, Jiangxi region chose to maintain stability yesterday, digesting the active price adjustment sentiment from the previous day. This week, the aluminum scrap market is expected to hover at highs, with cautious price adjustments. Shredded aluminum tense scrap prices remain resilient due to tight supply.

Overseas Markets: 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. Due to a slight depreciation of the RMB, the immediate loss from imports has widened to approximately 900 yuan/mt. In Thailand, the local tax-excluded quote for ADC12 is concentrated at 82-83 Thai baht/kg.

Inventory: According to SMM statistics, the combined daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi reached 24,546 mt on July 9, increasing by 299 mt from the previous trading day and 3,267 mt WoW.

Summary: In the spot market, SMM A00 aluminum prices rose by 60 yuan/mt to 20,660 yuan/mt on Wednesday, while SMM ADC12 prices temporarily stabilized at 20,000 yuan/mt. Recently, both domestic and overseas aluminum scrap supplies have tightened, directly causing significant difficulties for secondary aluminum plants in raw material procurement. Market competition for "material scrambling" has intensified, while production costs continued to rise and corporate losses on production expanded. Constrained by both raw material shortages and weakening demand, multiple secondary aluminum manufacturers have been forced to implement production cuts, with some even halting operations. Overall, the strong cost support and weak demand suppression remain in a prolonged tug-of-war, and ADC12 prices are expected to maintain a rangebound pattern with a weak bias throughout July.

[The provided information is for reference only. This article does not constitute direct advice for investment research decisions. Clients should exercise caution in decision-making, avoid substituting independent judgment with this information, and SMM bears no responsibility for any decisions made by clients.]

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