Cast aluminum alloy inventory maintains a slight destocking trend [SMM Morning Comment on Cast Aluminum Alloy]

SMM Cast Aluminum Alloy Morning Comment on Nov. 1

Futures: The most-traded cast aluminum alloy AD2601 futures contract opened at 21,010 yuan/mt in Friday's night session, moved sideways and declined after opening, hit a bottom of 20,925 yuan/mt, and finally closed at 20,955 yuan/mt, down 55 yuan/mt or 0.26% from the previous close. Trading volume was 2,208, and open interest was 14,726. Affected by bulls reducing positions in the short term, it is expected to move sideways and pull back in the range of 20,800-21,100 yuan/mt, with focus on the effectiveness of MA5 support.

Spot-Futures Price Spread Report: According to SMM data, the theoretical premium of SMM ADC12 spot price to the most-traded cast aluminum alloy futures contract (AD2601) was 420 yuan/mt based on the 10:15 closing price on November 7.

Aluminum Scrap: Spot primary aluminum prices rose significantly on Friday compared to the previous trading day, with SMM A00 spot aluminum closing at 21,540 yuan/mt. Aluminum scrap market prices followed aluminum prices higher. Baled UBC was quoted in a concentrated range of 16,100-16,600 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in a concentrated range of 17,700-18,200 yuan/mt (ex-tax). Prices for baled UBC, clean tapping aluminum wire, shredded aluminum tense scrap (priced based on aluminum content), scrap wheel hub, and mechanical casting aluminum scrap increased by 100-150 yuan/mt WoW. The domestic 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) potentially moving up to 17,900-18,400 yuan/mt. The macro environment continues to release positive signals both domestically and internationally, and the improvement trend in orders from downstream cast alloy processing segments is expected to continue, providing sustained support for aluminum scrap prices. However, two major risks require vigilance: first, against the backdrop of high aluminum prices, enterprises mostly adopt an "on-demand purchasing" strategy, reducing raw material inventory accumulation, which may suppress prices; second, the implementation of environmental protection-driven production restrictions in central China and the potential risk of primary aluminum prices retreating after a rapid rise. If these risks materialize, the aluminum scrap market will face pullback pressure. Overall, the aluminum scrap market will continue its complex tug-of-war between sellers and buyers. Market participants are advised to closely track primary aluminum price trends, changes in downstream demand, and developments in environmental protection policy.

Silicon Metal: Spot silicon metal prices were largely stable last week, with SMM oxygen-blown #553 silicon in east China at 9,400-9,500 yuan/mt, and #441 silicon at 9,600-9,700 yuan/mt. Futures market prices fluctuated significantly. The silicon metal SI2612 futures contract rose to around 9,300 yuan/mt due to fund influence, increasing the willingness of northern silicon metal enterprises to sell based on the spot-futures price spread to arbitragers. Inventory Social Inventory: According to SMM statistics, the total social inventory of silicon metal in major regions was 552,000 mt on November 6, down 6,000 mt WoW. This included 127,000 mt in general social warehouses (up 3,000 mt WoW) and 425,000 mt in delivery social warehouses (including portions not registered as warrants and spot inventory, down 9,000 mt WoW). Some cargoes were transferred from futures delivery warehouses to regular warehouses or other locations, with limited arrivals during the week, leading to an overall decline in social inventory MoM (excluding Inner Mongolia, Gansu, etc.).

Overseas Market: Overseas ADC12 offers were in the range of $2,560–2,590/mt, while domestic spot prices rose by 100 yuan/mt to 20,500–20,700 yuan/mt, widening the immediate import loss to around 300 yuan/mt. Local ADC12 offers in Thailand (excluding tax) stood at 83–84 baht/kg.

Inventory: According to SMM statistics, the daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 49,705 mt on November 10, down 294 mt from the previous trading day and also down 294 mt WoW from Monday (November 3).

Summary: Aluminum prices continued their upward trend last Friday, with the SMM ADC12 price rising by 100 yuan/mt to 21,450 yuan/mt. The current tight supply of aluminum scrap persists, coupled with high fluctuations in auxiliary material prices such as copper, providing cost support and sustaining short-term upward momentum for ADC12 prices. Although demand benefits from the resilience of end-use consumption, the rapid surge in aluminum prices has triggered fear of high prices among downstream enterprises, leading to a decline in market trading activity. In the short term, ADC12 prices are expected to hold up well, with close attention to the improvement in aluminum scrap supply, the implementation effects of policies, and changes in the procurement pace of downstream enterprises.

[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 as decision-making advice.]