Cast Aluminum Alloy Fluctuates Upward Policy Disruptions Intensify Tug-of-War Between Sellers and Buyers in Aluminum Scrap [SMM Cast Aluminum Alloy Morning Comment]

8.22 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded AD2511 cast aluminum alloy futures contract opened at 20,130 yuan/mt, hit a low of 20,105 yuan/mt, and reached a high of 20,240 yuan/mt overnight, closing at 20,220 yuan/mt, up 95 yuan/mt or 0.47% from the previous close. Trading volume was 926 lots, with open interest at 8,014 lots, mainly driven by an increase in long positions.

Spot-Futures Price Spread Daily Report: According to SMM data, on August 21, the theoretical premium of SMM ADC12 spot price over the most-traded AD2511 futures contract (closing price at 10:15) widened to 315 yuan/mt.

Aluminum Scrap: On Thursday, the spot primary aluminum price increased by 160 yuan/mt compared to the previous trading day, with SMM A00 spot closing at 20,680 yuan/mt. Overall, the aluminum scrap market prices rose. Baled UBC increased by 50 yuan/mt WoW, shredded aluminum tense scrap (priced based on aluminum content), car wheel hubs, and motorcycle wheel hubs increased by 100 yuan/mt WoW. In Jiangxi and Anhui regions, the prices of raw aluminum scrap collectively increased by 100 yuan/mt today, making it increasingly difficult to purchase aluminum scrap. Recently, multiple regions have initiated special clean-up work for irregular tax rebates, which has caused widespread shock in the secondary aluminum market. Currently, the market is still in a transitional observation phase, awaiting the implementation of relevant policies. Afterward, some downstream secondary aluminum producers in certain areas will face pressure due to rising tax costs. To offset these costs, enterprises may lower raw material procurement prices, increasing the pressure on domestic aluminum scrap prices. However, supply side, the short-term supply of aluminum scrap will remain tight, giving suppliers a certain degree of pricing power. Overall, SMM believes that subsequent aluminum scrap prices will operate under pressure, entering a stage of bargaining between sellers and buyers.

Silicon Metal: (1) Prices: This week, the spot silicon metal prices fluctuated widely, with rapid changes in increases and decreases. Yesterday, SMM oxygen-blown #553 silicon in East China ranged from 9,200 to 9,300 yuan/mt, and #441 silicon ranged from 9,500 to 9,600 yuan/mt. On Wednesday, the silicon metal futures prices fell sharply, with the most-traded contract hitting a low below 8,200 yuan/mt. Silicon suppliers' quotes followed the decline, with low-price transactions of oxygen-blown #553 silicon in East China ranging from 8,800 to 9,000 yuan/mt. On Thursday, the futures rebounded, closing at 8,635 yuan/mt, leading to another increase in supplier quotes. Downstream users restocked at lower prices, but after the price increase, market inquiry activity decreased, resulting in fewer new orders. (2) Production: Over the past week, the number of operating furnaces in Xinjiang and other regions increased, leading to a sustained increase in silicon metal production. (3) Inventory: As of August 21, SMM statistics show that the total social inventory of silicon metal in major regions was 543,000 mt, down 2,000 mt WoW. Among this, the general social warehouse inventory was 117,000 mt, unchanged WoW, while the social delivery warehouse inventory (including unregistered warrants and spot parts) was 426,000 mt, down 2,000 mt WoW. [Excluding Inner Mongolia, Gansu, and other regions]

 Overseas market: Current overseas ADC12 offers rose slightly to the range of $2,470-2,500/mt, as domestic prices increased and the RMB exchange rate rose, narrowing the immediate import losses slightly; local ADC12 offers in Thailand, excluding tax, rose slightly to 83-84 baht/kg.

Inventory: According to SMM statistics, as of August 21, the social inventory of secondary aluminum alloy ingots in mainstream domestic consumption areas was 35,144 mt, down 11 mt WoW.

Summary: Yesterday, aluminum prices rebounded sharply, and the SMM ADC12 price followed with an increase of 100 yuan/mt to 20,450 yuan/mt. Currently, aluminum scrap supply remains tight, with prices generally rising, pushing up the cost of raw materials and driving secondary aluminum alloy prices higher. Additionally, recent news of tax rebate cancellations in Anhui and Jiangxi has prompted companies to raise prices enthusiastically in response to cost pressures. Demand side, the traditional off-season atmosphere continues, with actual consumption showing limited improvement. In the short term, ADC12 prices are expected to maintain an upward fluctuating trend, supported by cost factors and policy disruptions, making prices more likely to rise than fall, but weak demand will constrain upside room. If policy impacts deepen or peak season demand is released as expected, prices may break through the current range; conversely, if policy implementation is mild and demand remains weak, prices may continue to consolidate at high levels. Subsequent focus should be on the progress of policy implementation, the recovery of aluminum scrap supply, and marginal improvements in end-use demand.

[Data source statement: Except for publicly available information, other data are processed by SMM based on public information, market exchanges, and SMM's internal database model, for reference only and not constituting decision-making advice.]