Off-Season Inventory Buildup Suppresses Prices, Policy Adjustment Period Elevates Raw Material Costs [SMM Cast Aluminum Alloy Morning Comment]

8.18 SMM Cast Aluminum Alloy Morning Comment

Futures: On Friday night, the most-traded cast aluminum alloy contract AD2511 opened at its highest point of 20,250 yuan/mt, hit a low of 20,060 yuan/mt, and finally closed at 20,095 yuan/mt, down 70 yuan/mt or 0.35% from the previous close. The trading volume was 909 lots, with open interest at 7,942 lots, mainly due to bulls reducing their positions.

Spot-Futures Price Spread Daily Report: According to SMM data, on August 15, the theoretical premium of SMM ADC12 spot price over the closing price of the most-traded cast aluminum alloy contract (AD2511) at 10:15 AM was 205 yuan/mt.

Aluminum Scrap: In the previous trading day, the spot primary aluminum price remained unchanged compared to the previous trading day, with SMM A00 spot closing at 20,710 yuan/mt. The overall aluminum scrap market prices were stable. During the current off-season, downstream scrap utilization enterprises showed weak order releases, with purchases mainly driven by rigid demand. The centralized quotes for baled UBC in the previous trading day ranged from 15,500 to 16,000 yuan/mt (excluding tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted between 17,100 and 17,600 yuan/mt (excluding tax). Baled UBC, shredded aluminum tense scrap (priced based on aluminum content), and wheel hubs (both automotive and motorcycle) remained flat WoW. It is expected that the price center of the aluminum scrap market will further shift upwards this week. Affected by the transitional period of policies related to secondary aluminum, raw material purchase prices are likely to rise, with the supply of shredded aluminum tense scrap (priced based on aluminum content) becoming tighter, fluctuating within the range of 17,100-17,600 yuan/mt (excluding tax); supported by consumption from downstream can stock enterprises, baled UBC is expected to operate within the range of 15,500-16,000 yuan/mt (excluding tax).

Silicon Metal: Last week, the spot silicon metal prices fluctuated rangebound, with SMM oxygen-blown #553 silicon in east China ranging from 9,300 to 9,500 yuan/mt, and #441 silicon from 9,600 to 9,800 yuan/mt. In the futures market, the most-traded SI2511 contract fluctuated considerably, with the spot-futures price spread remaining largely unchanged. Downstream users showed a strong sentiment to drive down prices when buying the dip.

Overseas Market: Currently, overseas ADC12 quotes remain steady in the range of 2,460-2,480 USD/mt. Domestic import spot prices have risen to around 19,700 yuan/mt. Coupled with the appreciation of the RMB exchange rate, the immediate loss on imports has narrowed to within 500 yuan/mt; local Thai ADC12 quotes (excluding tax) are concentrated at 82-84 THB/kg.

Inventory: According to SMM statistics, on August 18, the daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 31,653 mt, an increase of 10 mt from the previous trading day and an increase of 308 mt from the previous Monday (August 11).

Summary: On Friday, aluminum prices stabilized, and there was insufficient sentiment for price adjustments in the secondary aluminum market, keeping prices stable, with SMM ADC12 prices holding steady at 20,350 yuan/mt. Recently, multiple local governments have been clearing and abolishing non-compliant fiscal return and subsidy policies. Affected by these policy adjustments, some secondary aluminum plants have taken measures to reduce or halt production, waiting to observe the direction of subsequent policy implementation. On the consumption front, the traditional off-season atmosphere persisted, with no significant improvement in actual demand, and overall transactions remained sluggish. In the short term, cost support and policy fluctuations may continue to drive prices to fluctuate upward, but weak demand and inventory buildup pressure will limit the upside room. Close attention should be paid to 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 processed by SMM based on its internal database model, for reference only and not constituting decision-making advice.]