The Tug-of-War Between Sellers and Buyers in Aluminum Scrap Intensifies, Spot-Futures Price Spread for Cast Aluminum Alloy Widens Again [SMM Cast Aluminum Alloy Morning Comment]

9.2 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded cast aluminum alloy AD2511 contract opened at the day's high of 20,350 yuan/mt on Friday night, hitting an intraday high of 20,365 yuan/mt and a low of 20,270 yuan/mt, before closing at 20,325 yuan/mt, down 25 yuan/mt (0.12%) from the previous settlement. Trading volume stood at 571 lots, while open interest declined to 8,297 lots, mainly due to long position liquidation.

Spot-Futures Price Spread Report: According to SMM data, the spot price of SMM ADC12 showed a theoretical premium of 495 yuan/mt against the closing price of the most-traded cast aluminum alloy contract (AD2511) at 10:15 am on August 29, with the spread widening.

Aluminum scrap: Spot primary aluminum prices fell MoM on Monday, with SMM A00 spot aluminum closing at 20,620 yuan/mt, while aluminum scrap prices followed the downtrend. As the traditional peak season approaches, orders at some downstream scrap utilization enterprises recovered. However, tight supply remained the dominant theme in the scrap market, keeping purchasing prices elevated and generally tracking aluminum price movements. Baled UBC and shredded aluminum tense scrap (priced based on aluminum content) dropped 100 yuan/mt WoW. Jiangxi saw significant adjustments in scrap aluminum offers yesterday, with aluminum tense scrap down 100 yuan/mt and wrought aluminum alloy scrap down 200-300 yuan/mt, indicating initial policy impact. SMM expects aluminum scrap prices to hover at highs this week amid intensifying tug-of-war between sellers and buyers. From a macro perspective, the ongoing nationwide crackdown on irregular tax rebates will profoundly reshape the cost structure of the secondary aluminum industry. During the policy transition period, downstream scrap users may further bargain down purchasing prices to offset potential tax cost increases, exacerbating downside risks for scrap prices. Nevertheless, tight supply conditions are unlikely to ease in the short term, particularly for shredded aluminum tense scrap, which will continue to bolster suppliers' pricing power. SMM forecasts shredded aluminum tense scrap (priced based on aluminum content) to trade within 17,100-17,600 yuan/mt (ex-tax), while baled UBC prices may fluctuate between 15,500-16,000 yuan/mt (ex-tax) supported by rigid demand. Overall, the market should closely monitor policy implementation and September peak season consumption recovery, with price trends depending on the interplay between cost transmission and supply constraints.

Silicon metal: On September 1, SMM east China non-oxygen blown #553 silicon metal traded at 8,900-9,000 yuan/mt; oxygen-blown #553 at 9,000-9,100 yuan/mt; #521 at 9,200-9,300 yuan/mt; #441 at 9,200-9,500 yuan/mt; #421 at 9,300-9,500 yuan/mt; #421 for silicone use at 9,600-10,100 yuan/mt; and #3303 at 10,200-10,400 yuan/mt. Prices edged down in select areas of Tianjin and north-west China, while remaining stable in Kunming, Huangpu Port, Sichuan, Xinjiang, and Shanghai.

Overseas markets: Current overseas ADC12 offers stood at $2,480-2,500/mt. With rising domestic prices and a stronger RMB, import losses narrowed further to around 200 yuan/mt. Local ex-tax ADC12 offers in Thailand temporarily held at 83-84 baht/kg.

Inventory: According to SMM statistics, the combined daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 34,501 mt on September 2, an increase of 786 mt from the previous trading day and 2,128 mt WoW (August 25).

Summary: Aluminum prices fluctuated downward yesterday, while SMM ADC12 prices held steady at 20,750 yuan/mt. Post-September regional tax rebate policies remain unclear, leading to strong wait-and-see sentiment in the secondary aluminum market. Coupled with tight raw material supply, firm cost support kept manufacturers' offers steady. Demand side, the approaching traditional peak season drove a slight recovery in downstream procurement, but high prices restrained transaction volumes, with actual end-use demand remaining mediocre. ADC12 prices are expected to continue fluctuating upward in the short term, supported by costs, low inventory, and policy pressure. However, slow demand recovery may limit upside room. Future focus should be on policy implementation progress, aluminum scrap supply recovery, and marginal changes 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 as decision-making advice.]