Aluminum Scrap Prices Fluctuate at Highs, ADC12 Driven by Costs Unlikely to Fall in the Short Term [SMM Cast Aluminum Alloy Morning Comment]

9.17 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded cast aluminum alloy AD2511 contract opened at 20,460 yuan/mt overnight, hit a high of 20,560 yuan/mt and a low of 20,405 yuan/mt, and closed at 20,515 yuan/mt, up 35 yuan/mt or 0.17% from the previous close. Trading volume was 970 lots, and open interest was 7,937 lots, with bears mainly reducing positions.   

Basis Report: According to SMM data, on September 16, the theoretical premium of SMM ADC12 spot price to the most-traded cast aluminum alloy contract (AD2511) at the 10:15 closing price was 525 yuan/mt.

Aluminum Scrap: On Tuesday, spot primary aluminum prices were flat from the previous trading day, with SMM A00 spot aluminum closing at 20,950 yuan/mt. Aluminum scrap prices were generally stable. Baled UBC was quoted at 15,750-16,250 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 17,500-18,000 yuan/mt (tax excluded). Baled UBC, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap were flat from the previous trading day. Recently, affected by various factors such as high aluminum price volatility and a worsening aluminum scrap supply deficit, wait-and-see sentiment has gradually intensified in some regional yards, with significant lag in price adjustments. Aluminum scrap prices are expected to hover at highs this week, with intensified bargaining between sellers and buyers. From a macro perspective, the cleanup of illegal tax rebates across regions continues to deepen. Although policies are still in a transition period and current purchasing quotes do not yet fully reflect the impact, in the medium and long term, scrap utilization enterprises will bargain down purchasing prices to pass on rising tax costs, posing a downside risk to aluminum scrap prices. On the other hand, the tight supply situation is unlikely to improve in the short term, especially the tight supply of shredded aluminum tense scrap resources, which will continue to give suppliers bargaining power. SMM expects the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) to hover around 17,500-18,000 yuan/mt, while baled UBC prices will fluctuate between 15,800-16,300 yuan/mt.

Silicon Metal: On September 16, silicon metal prices rose slightly. SMM oxygen-blown #553 silicon in east China was at 9,200-9,400 yuan/mt, up 100 yuan/mt from the previous day, and #441 silicon was at 9,500-9,700 yuan/mt, up 100 yuan/mt from the previous day. In the futures market, the silicon metal main continuous contract SI2511 opened at 9,000 yuan/mt, hit a high of 9,130 yuan/mt and a low of 8,855 yuan/mt, and closed at 8,915 yuan/mt at the end of the session, up 115 yuan/mt from the previous day. Silicon enterprises in northern China maintained active willingness to sell, with their quotes more competitive than those of trading firms engaging in both spot and futures markets. The increase in spot transaction prices lagged behind the futures market.

Overseas Market: Current overseas ADC12 quotes remain in the range of 2,520-2,550 USD/mt. Affected by the continued strengthening of the RMB exchange rate, the immediate import loss narrowed again, approaching the break-even line. Local ADC12 offers in Thailand edged down to 81-82 baht/kg.

Inventory side: According to SMM statistics, the daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 48,899 mt on September 17, up 279 mt from the previous trading day.

Summary: Aluminum prices were flat yesterday, with the SMM ADC12 price holding steady at 21,050 yuan/mt. Due to tight circulation of aluminum scrap resources both domestically and overseas and increased demand from scrap utilization enterprises, the aluminum scrap market has become more strained, providing continued cost support for ADC12 prices. Demand side, downstream purchasing sentiment has slightly recovered since September, with demand continuing to rebound, though the actual strength of the traditional peak season remains to be seen. Some enterprises, to ensure order fulfillment, have resorted to high-priced or even cross-regional procurement. To avoid losses, manufacturers are taking orders more cautiously, actively controlling order sizes and operating rates. Overall, supported by strong cost factors and pre-holiday downstream stocking demand ahead of the National Day holiday, ADC12 prices are expected to hover at highs in the near term. Going forward, close attention should be paid to raw material supply conditions, the pace of demand recovery, and potential market impacts from policy developments.

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