This Week, Operating Rates at Leading Secondary Aluminum Producers Slightly Rebounded; Next Week's Double Festival Holiday to Cause Phased Pullback in Operations [SMM Cast Aluminum Alloy Morning Comment]

SMM Cast Aluminum Alloy Morning Comment for September 26

Futures: The most-traded cast aluminum alloy AD2512 contract opened at the day's low of 20,385 yuan/mt overnight, hit a high of 20,450 yuan/mt, and finally closed at 20,385 yuan/mt, flat from the previous close, with a 0% change. Trading volume was 661 lots, and open interest was 11,768 lots, mainly driven by an increase in long positions.   

Basis Report: According to SMM data, on September 25, the theoretical spot-futures price spread for SMM ADC12 spot aluminum against the most-traded cast aluminum alloy contract (AD2512) at the 10:15 closing price was a premium of 495 yuan/mt.

Warrant Report: On September 25, the total registered warrants for cast aluminum alloy amounted to 19,181 mt, an increase of 3,968 mt from the previous trading day. By region: Shanghai (3,073 mt, up 0 mt), Guangdong (1,571 mt, up 0 mt), Jiangsu (5,579 mt, up 2,374 mt), Zhejiang (5,628 mt, up 845 mt), Chongqing (3,330 mt, up 749 mt), and Sichuan (0 mt, up 0 mt).

Industry Dynamics: The operating rate of leading secondary aluminum enterprises rose 0.7 percentage points WoW to 56.6% this week. Currently, large enterprises have relatively optimistic orders, which are stable with an upward trend, and companies are actively fulfilling orders, driving the operating rate higher. However, due to the impact of Typhoon Hagibis, multiple areas in Guangdong Province initiated the "Five Stops" emergency response, leading to a complete suspension of production and logistics transportation at local secondary aluminum plants. Local enterprises basically halted production for 1–3 days, dragging down the operating rate in the region. On the afternoon of the 24th, many areas gradually lifted the "Five Stops" measures, and enterprise production and transportation resumed in an orderly manner. Looking ahead to next week, coinciding with the Mid-Autumn Festival and National Day holidays, production arrangements in the secondary aluminum industry are diverging: some manufacturers plan to maintain production without stoppage; some enterprises intend to arrange about 3 days off; others have not yet finalized specific holiday plans and need to clarify further based on downstream customer demand and order situations. Overall, holiday factors will have a certain impact on the industry's production pace, and the overall operating rate in the secondary aluminum industry is expected to experience a phased pullback next week.

Aluminum Scrap Side: Spot primary aluminum prices rebounded on Thursday compared to the previous trading day, with SMM A00 aluminum closing at 20,770 yuan/mt, and aluminum scrap market prices generally followed the increase. With the National Day holiday approaching, enterprises in parts of Henan, Jiangxi, and Shandong reported that they had started stockpiling production raw materials in advance for the holiday. Amid the shortage of aluminum scrap, overall market prices remained high. Baled UBC pulled back 50 yuan/mt MoM from the previous trading day, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hubs, and mechanical casting aluminum scrap rose 100 yuan/mt MoM. Aluminum tense scrap prices in Anhui and Hubei remained unchanged. Aluminum scrap prices are expected to hover at highs next week. On one hand, the tight supply fundamentals of aluminum scrap are difficult to alleviate in the short term, and the supporting effect of pre-holiday downstream stocking demand on prices continues to ferment. On the other hand, there has been no further feedback on the implementation of domestic tax cleanup policies, but in the long term, scrap utilization enterprises still have the intention to drive down prices. Overall, the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) is expected to fluctuate around 17,300-17,800 yuan/mt, while baled UBC prices hover near 15,600-16,100 yuan/mt. The market needs to focus on the sustainability of downstream stocking demand before the National Day holiday, the actual implementation pace of tax policies, and further guidance from primary aluminum price trends.

Silicon metal: (1) Prices: Spot silicon metal prices remained firm this week, with limited low-priced supply in the market. Combined with increased price acceptance from downstream users' stocking demand, the center of spot transaction prices for silicon metal maintained an upward trend WoW. As of September 25, SMM oxygen-blown #553 silicon in east China was at 9,400-9,600 yuan/mt, up 150 yuan/mt WoW; #441 silicon was at 9,600-9,800 yuan/mt, up 100 yuan/mt WoW; and #3303 silicon was at 10,500-10,600 yuan/mt, up 100 yuan/mt WoW. (2) Social inventory: According to SMM statistics, social inventory of silicon metal in major regions totaled 543,000 mt on September 25, flat WoW. This included 120,000 mt in general social warehouses (flat WoW) and 423,000 mt in delivery social warehouses (including unregistered warrants and spot portions, flat WoW). Recently, some silicon metal cargoes from Xinjiang have been gradually transferred to areas like Tianjin, leading to significant inventory changes between regions. Pre-holiday downstream stocking demand increased, resulting in good warehouse inflow and outflow volumes. (Excluding Inner Mongolia, Gansu, etc.)

Overseas market: Overseas ADC12 offers were concentrated at $2,530-2,560/mt, while domestic spot prices were at 20,000-20,300 yuan/mt, with immediate import losses widening to around 400 yuan/mt. Local ADC12 ex-tax offers in Thailand remained at 81-82 baht/kg.

Inventory: According to SMM statistics, social inventory of secondary aluminum alloy ingots in mainstream domestic consumption areas was 55,700 mt on September 25, up 400 mt from last Thursday.

Summary: On Friday, the SMM A00 aluminum price rose 90 yuan/mt from the previous day to 20,770 yuan/mt, while the SMM ADC12 price increased 50 yuan/mt to 20,900 yuan/mt. Pre-holiday raw material stocking demand from secondary aluminum plants was constrained by tight aluminum scrap resources, highlighting procurement pressure. Demand side, as the National Day and Mid-Autumn Festival holidays overlapped this year, downstream die-casting enterprises extended their holiday duration by 1-2 days YoY, with most enterprises taking 3-8 days off (a few maintained production). Despite pre-holiday stocking demand driving a recovery in transactions among manufacturers and traders, the overall increase remains limited. Overall, cost support from aluminum scrap and pre-holiday stocking demand provide a floor for ADC12 prices. However, extended downstream holidays, limited restocking increments, and continuous inventory buildup constrain upside potential. ADC12 prices are expected to fluctuate rangebound before the holiday, with close attention needed on raw material availability, holiday inventory accumulation, and post-holiday demand recovery.

[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.]