The most-traded aluminum cast alloy futures contract rose slightly overnight, with tight aluminum scrap supply supporting the outlook [SMM Morning Comment on Cast Aluminum Alloy]

SMM Morning Comment on Cast Aluminum Alloy on August 15

Futures: Overnight, the most-traded AD2511 futures contract for cast aluminum alloy opened at 20,115 yuan/mt, reaching a high of 20,195 yuan/mt and a low of 20,115 yuan/mt, before closing at 20,175 yuan/mt, up 35 yuan/mt or 0.17% from the previous close. Trading volume stood at 791 lots, with open interest at 8,174 lots, mainly due to bears reducing their positions.    

Spot-Futures Price Spread Daily Report: According to SMM data, on August 14, the SMM ADC12 spot price was at a theoretical premium of 205 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 fell by 50 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,710 yuan/mt. The aluminum scrap market prices remained stable overall. Baled UBC aluminum scrap was quoted at 15,500-16,000 yuan/mt (tax not included), while shredded aluminum tense scrap (water price) was quoted at 17,100-17,600 yuan/mt (tax not included). Baled UBC aluminum scrap, shredded aluminum tense scrap (water price), and automotive and motorcycle wheel hubs remained unchanged MoM. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed by 60 yuan/mt to 1,912 yuan/mt, while the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai increased slightly by 4 yuan/mt to 1,945 yuan/mt. It is expected that the price center of the aluminum scrap market will move further upward next week. Affected by the pain period of policies related to secondary aluminum, the purchase price of raw materials will be pushed up, and the tight supply of shredded aluminum tense scrap (water price) will intensify, with the operating range expected to fluctuate between 17,100-17,600 yuan/mt (tax not included). Baled UBC aluminum scrap, supported by downstream can stock enterprises' consumption, will operate within the range of 15,500-16,000 yuan/mt (tax not included).

Silicon Metal: (1) Price: This week, the spot price of silicon metal first rose slightly and then stabilized. Yesterday morning, SMM east China oxygen-blown #553 silicon was quoted at 9,300-9,500 yuan/mt, and #441 silicon at 9,600-9,800 yuan/mt. Yesterday, the main futures contract was in the doldrums, opening at 8,605 yuan/mt, reaching a high of 8,810 yuan/mt, and closing at 8,675 yuan/mt. (2) Production: On the supply side, the operating rate in Xinjiang increased slightly, with large plants resuming production at a relatively slow pace. The operating rates in other regions remained largely unchanged, and the weekly production of silicon metal increased slightly MoM. (3) Inventory: According to SMM statistics, the social inventory of silicon metal in major regions totaled 545,000 mt on August 14, down 2,000 mt WoW. Among them, the social general warehouse inventory was 117,000 mt, down 1,000 mt WoW, and the social delivery warehouse inventory was 428,000 mt (including unregistered warrants and spot cargo), down 1,000 mt WoW. (Excluding regions such as Inner Mongolia and Gansu)

Overseas Market: Currently, overseas ADC12 quotes remain stable at 2,460-2,480 USD/mt. Domestic imported spot aluminum prices have risen to around 19,700 yuan/mt. Coupled with the appreciation of the RMB exchange rate, the immediate loss from imports has narrowed to within 500 yuan/mt. The local ADC12 quotes in Thailand (tax not included) have risen slightly to 82-84 baht/kg.

Inventory: According to SMM statistics, as of August 14, the social inventory of secondary aluminum alloy ingots in mainstream consumption areas totaled 35,200 mt, a WoW increase of 662 mt. Early orders from futures-spot traders were gradually delivered to warehouses, while weak consumption led to poor outflows from warehouses of aluminum alloy ingots. The overall inventory buildup continued, but the growth rate showed a slowdown.

Summary: Aluminum prices pulled back slightly on Thursday, with the secondary aluminum market remaining largely stable amid high costs. Recently, the overall operating rate in the industry has shown a downward trend, mainly due to insufficient orders and losses caused by cost-price imbalances. Additionally, some secondary aluminum producers reported that local governments are revoking irregular fiscal refunds and subsidy policies. Affected by these policy adjustments, some secondary aluminum plants have reduced or suspended production to observe further policy implementation. The traditional off-season atmosphere persists in consumption, with no significant improvement in actual demand, resulting in sluggish overall transactions. Short-term cost support and policy uncertainties may continue to drive prices to fluctuate upward, but weak demand and inventory buildup pressure will limit upside room. Market participants should monitor policy implementation and the pace of demand recovery during the peak season.

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