The inventory buildup of aluminum alloy social inventory has slowed down significantly, and cost-driven increases have pushed spot aluminum prices higher again [SMM Morning Comment on Cast Aluminum Alloy]

8.8 SMM Morning Comment on Cast Aluminum Alloy

Futures: Overnight, the most-traded AD2511 cast aluminum alloy futures contract opened at 19,980 yuan/mt, with a high of 20,105 yuan/mt, a low of 19,980 yuan/mt, and closed at 20,070 yuan/mt, down 65 yuan/mt or 0.32% from the previous close. Trading volume was 595 lots, and open interest was 8,665 lots, with bulls mainly reducing their positions.    

Spot-Futures Price Spread Daily Report: According to SMM data, on August 7, the SMM ADC12 spot price was at a theoretical premium of 110 yuan/mt over the closing price of the most-traded cast aluminum alloy futures contract (AD2511) at 10:15 a.m.

Aluminum Scrap: On Thursday, the spot price of primary aluminum increased by 60 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,690 yuan/mt, and the overall aluminum scrap market price rose. Baled UBC aluminum scrap was concentratedly quoted at 15,400-15,900 yuan/mt (tax not included), and shredded aluminum tense scrap (with water price) was concentratedly quoted at 17,100-17,600 yuan/mt (tax not included). Baled UBC aluminum scrap increased by 50 yuan/mt from yesterday, while shredded aluminum tense scrap (with water price) and automobile/motorcycle wheel hubs increased by 100 yuan/mt from yesterday. This week, the price center of the aluminum scrap market should have further returned to off-season levels, but due to the impact of the transitional period of policies related to secondary aluminum, it may push up the purchase price of raw materials. The supply of shredded aluminum tense scrap (with water price) is tightening, and the operating range is expected to fluctuate between 17,000-17,500 yuan/mt (tax not included). Baled UBC aluminum scrap is still suppressed by weak end-use demand, with an operating range of 15,300-15,800 yuan/mt (tax not included).

Silicon Metal: (1) Price: This week, silicon metal quotes first fell and then rebounded, with the overall spot trading center weakening from last week. Yesterday, SMM east China oxygen-blown #553 silicon was at 9,100-9,400 yuan/mt, and #441 silicon was at 9,500-9,600 yuan/mt. Futures market prices fluctuated frequently, with the most-traded SI2509 silicon metal futures contract oscillating near 8,400-8,800 yuan/mt during the week, with a maximum daily fluctuation range of over 400 yuan/mt. The futures market was volatile, with silicon enterprises quoting differently and downstream users observing more. New orders during the week were relatively light. (2) Supply and Demand: In July, the silicon supply-demand balance showed destocking. In August, both supply and demand increased, with the demand side seeing an increase in polysilicon production boosting silicon demand. On the supply side, the operating rate in Xinjiang increased, coupled with a small amount of incremental supply in the southwest, leading to an increase in silicon metal supply. (3) Inventory: According to SMM statistics, on August 7, the total social inventory of silicon metal in major regions was 547,000 mt, an increase of 7,000 mt from last week. Among them, social general warehouses had 118,000 mt, a decrease of 1,000 mt from last week, and social delivery warehouses had 429,000 mt (including unregistered warrants and spot cargo), an increase of 8,000 mt from last week. (Inner Mongolia, Gansu, etc. not included)

Overseas Market: Overseas ADC12 quotes remained stable at $2,460-2,480/mt. Imported spot aluminum prices rose to around 19,600 yuan/mt, maintaining an immediate loss state for imports. Local ADC12 quotes in Thailand were concentrated at 82-83 Thai baht/kg (tax not included).

Inventory: According to SMM statistics, as of August 7, the social inventory of secondary aluminum alloy ingots in mainstream domestic consumption areas stood at 33,400 mt, basically flat WoW, ending the continuous inventory buildup trend since early May. Entering August, as some warehouses approached storage capacity saturation and traders' willingness to take orders weakened, the growth rate of social inventory slowed down significantly, with some regions even showing slight destocking.

Summary: Aluminum scrap prices quickly followed aluminum prices higher during the week, and rising cost-side pressure fueled market sentiment for price adjustments. Yesterday, SMM ADC12 prices rose by 100 yuan/mt to 20,250 yuan/mt. In August, the secondary aluminum market remained constrained by tight aluminum scrap supply, with persistent cost pressure for enterprises supporting ADC12 price increases. However, weak consumption performance coupled with social inventory at high levels will limit the upside potential for prices. Secondary aluminum alloy prices are expected to hold up well with narrow fluctuations in early August. Short-term focus should be on the recovery pace of end-use demand and improvements in aluminum scrap supply.

[Data Source Statement: Except for publicly available information, other data are derived from public information, market exchanges, and processed by SMM based on its internal database model, for reference only and not constituting decision-making advice.]