Warrant and Inventory Both Increase, Tight Aluminum Scrap Supply Supports Costs [SMM Cast Aluminum Alloy Morning Comment]

Oct. 20 SMM Cast Aluminum Alloy Morning Comment

Futures: On Friday night, the most-traded cast aluminum alloy ad2512 futures contract opened at 20,495 yuan/mt, hit a high of 20,560 yuan/mt, hit bottom at 20,300 yuan/mt, and closed at 20,390 yuan/mt, down 100 yuan/mt or 0.49% from the previous close. Trading volume was 2,698 lots, and open interest was 13,220 lots, with the decrease mainly driven by bulls. Currently, the ad2512 contract is in a state of short-term weakness and medium-term consolidation, with attention focused on the breakout direction within the 20,360-20,450 yuan/mt range.

Spot-Futures Price Spread Daily Report: According to SMM data, on October 17, the theoretical premium of the SMM ADC12 spot price over the closing price of the most-traded cast aluminum alloy futures contract (AD2512) at 10:15 was 600 yuan/mt.

Warrant Daily Report: On October 15, the total registered volume of cast aluminum alloy warrants was 45,163 mt, an increase of 1,966 mt from the previous trading day. The breakdown by region is as follows: Shanghai (4,303 mt, unchanged), Guangdong (12,032 mt, up 1,665 mt), Jiangsu (8,590 mt, unchanged), Zhejiang (15,224 mt, up 301 mt), Chongqing (5,014 mt, unchanged), and Sichuan (0 mt, unchanged).

SHFE Inventory Weekly Report: On October 17, the total aluminum alloy inventory in delivery warehouses was 58,581 mt, an increase of 548 mt from the previous Friday. The regional breakdown is as follows: Shanghai (4,917 mt), Guangdong (19,027 mt), Jiangsu (11,702 mt), Zhejiang (16,770 mt), Chongqing (6,165 mt), and Sichuan (0 mt).

Aluminum scrap side: On Friday, the spot primary aluminum price was flat from the previous trading day, with the SMM A00 spot price closing at 20,950 yuan/mt, while aluminum scrap market prices were generally unchanged. Baled UBC scrap was concentrated at 15,900-16,500 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was concentrated at 17,300-17,800 yuan/mt (ex-tax). Baled UBC increased 50 yuan/mt WoW, while shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap were flat WoW. In Hubei, procurement difficulties for aluminum tense scrap became prominent, with prices for shredded aluminum tense scrap and mechanical casting aluminum scrap rising 200 yuan/mt in a single day. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference for mechanical casting aluminum scrap in Shanghai was 2,212 yuan/mt, and the price difference for mixed aluminum extrusion scrap free of paint in Foshan was 2,189 yuan/mt. The aluminum scrap market is expected to hold up well this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) hovering around 17,500-18,000 yuan/mt.

Silicon metal side: (1) Price: On Friday, silicon metal prices were largely stagnant with a slight weakening trend. SMM oxygen-blown #553 silicon in east China was at 9,300-9,400 yuan/mt, and #441 silicon was at 9,600-9,700 yuan/mt. In the futures market, the most-traded silicon metal futures contract closed lower at 8,430 yuan/mt at the end of Friday's session. Downstream silicon consumers primarily made purchases based on demand at low prices. 2) Production: The operating rate for silicon metal in Xinjiang continued its upward trend, with national supply of silicon metal maintaining an increase.

 Overseas Market: Overseas ADC12 offers held steady at $2,550–2,580/mt, while domestic spot prices remained stable at 20,300–20,500 yuan/mt. The immediate import loss narrowed to around 200 yuan/mt. Local ADC12 offers in Thailand were at 83 baht/kg, excluding tax.

Inventory: According to SMM statistics, as of October 20, the combined daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 49,056 mt, an increase of 32 mt from the previous trading day, but a decrease of 101 mt compared to the previous Monday (October 13).

Summary: Aluminum prices held steady last Friday compared to the previous day, with the SMM ADC12 price also stabilizing at 21,050 yuan/mt, showing insufficient momentum for price adjustments. Currently, the tight supply of aluminum scrap is difficult to alleviate in the short term, providing solid cost support. Some enterprises, constrained by material shortages or losses, have seen a decline in their operating rates. Meanwhile, demand resilience and low plant inventories continue to support prices. However, caution is warranted regarding the suppression of upside room from high social inventories and warrant pressure, along with attention to the impact of policy implementation on the supply side. ADC12 prices are expected to hold up well in the short term, with key focus on the circulation of raw materials, the pace of demand recovery, and inventory changes.

[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 do not constitute decision-making advice.]