Inventory of aluminum alloy ingots increased by 2,380 mt, resuming inventory buildup as demand slightly rebounded approaching the peak season [SMM Cast Aluminum Alloy Morning Comment]

8.29 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded AD2511 contract for cast aluminum alloy opened at the highest point of 20,370 yuan/mt, reached a high of 20,420 yuan/mt, and closed at the lowest point of 20,280 yuan/mt, down 70 yuan/mt or 0.34% from the previous close. Trading volume was 617 lots, with open interest at 8,274 lots, mainly due to an increase in short positions.

Spot-Futures Price Spread Daily Report: According to SMM data, on August 28, the theoretical premium of the SMM ADC12 spot price over the closing price of the most-traded AD2511 contract at 10:15 am expanded to 440 yuan/mt.

Aluminum Scrap: On Thursday, the spot price of primary aluminum fell 110 yuan/mt compared to the previous trading day, with SMM A00 spot closing at 20,730 yuan/mt, leading to a general decline in aluminum scrap prices. As the traditional peak season approaches, orders for some downstream scrap utilization enterprises have recovered, but the tight supply in the aluminum scrap market remains the main theme, keeping procurement prices high. Baled UBC fell 50 yuan/mt WoW, and shredded aluminum tense scrap (priced based on aluminum content) dropped 100 yuan/mt WoW. In Jiangxi and Anhui, the price of aluminum tense scrap followed suit, falling 100 yuan/mt, while in Hubei and Hunan, aluminum scrap prices remained unchanged, maintaining a wait-and-see attitude. It is expected that next week, aluminum scrap prices will fluctuate at highs, with intensified tug-of-war between sellers and buyers. From a macro perspective, the ongoing special cleanup of illegal tax rebates in multiple regions will have a profound impact on the cost structure of the secondary aluminum industry. During the policy transition period, downstream scrap utilization enterprises may further drive down purchasing prices to offset potential increases in tax costs, intensifying the risk of aluminum scrap price declines. However, the tight supply situation is unlikely to change in the short term, especially the scarcity of shredded aluminum tense scrap, which will continue to give suppliers bargaining power. SMM expects that the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) will be around 17,100-17,600 yuan/mt (excluding tax), while baled UBC prices, supported by rigid demand, will hover around 15,500-16,000 yuan/mt (excluding tax). Overall, the market needs to closely monitor the implementation of policies and the strength of the "September peak season" consumption recovery, as price trends will depend on the outcome of the tug-of-war between cost transmission and supply shortages.

Silicon Metal: (1) Prices: This week, spot silicon metal prices were in the doldrums. Yesterday, SMM oxygen-blown #553 silicon in east China was priced at 9,200-9,300 yuan/mt, flat WoW, while #441 silicon was priced at 9,400-9,600 yuan/mt, down 50 yuan/mt WoW. Silicon metal futures prices showed strong fluctuations, with suppliers engaging in "rat race" competition, and individual transactions for oxygen-blown #553 silicon in east China even went below 9,000 yuan/mt. The most-traded SI2511 contract for silicon metal futures fluctuated around 8,400-8,700 yuan/mt during the week, showing a trend of being in the doldrums, and downstream users of silicon metal continued to restock at low prices. (2) Production: In August, both supply and demand for silicon metal increased, with expectations of a slight destocking. 3) Social inventory: SMM statistics show that as of August 28, the total social inventory of silicon metal in major regions was 541,000 mt, down 2,000 mt WoW. This includes 119,000 mt in general social warehouses, up 2,000 mt WoW, and 422,000 mt in delivery social warehouses (including unregistered warrants and spot cargo), down 4,000 mt WoW. (Excluding Inner Mongolia, Gansu, etc.)

Overseas market: Current overseas ADC12 offers are in the range of $2,480-2,500/mt. Due to rising domestic prices and a stronger RMB exchange rate, the immediate import loss has narrowed to around 200 yuan/mt. Local ADC12 offers in Thailand, excluding tax, are temporarily at 83-84 baht/kg.

Inventory: According to SMM statistics, as of August 28, the social inventory of secondary aluminum alloy ingots in mainstream domestic consumption areas was 37,525 mt, up 2,380 mt from last Thursday.

Summary: Aluminum prices pulled back yesterday, while secondary aluminum market offers remained largely stable. Due to tight circulation, aluminum scrap prices held up well, continuing to support ADC12 prices. Additionally, frequent news of tax rebate cancellations and back taxes in multiple regions has strengthened companies' willingness to pass on costs, leading to a short-term characteristic of being more likely to rise than fall. Demand side, approaching the traditional peak season in September, downstream procurement has only mildly recovered, and high prices have suppressed market inquiries, resulting in active inquiries but average actual transactions. With the spot-futures price spread strengthening, trading firms engaging in both spot and futures market have seen improved sales. ADC12 prices are expected to continue fluctuating upward in the short term, supported by cost pressures, low inventory, and policy pressures, but slow demand recovery may limit upside room. Follow-up attention should be paid to the progress of policy implementation, the recovery of aluminum scrap supply, and marginal changes in end-use demand.

[Data source statement: Except for public 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.]