The Most-Traded Contract Fluctuated and Closed Lower, Tight Supply of Aluminum Scrap Supports Costs [SMM Cast Aluminum Alloy Morning Comment]

December 4 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded cast aluminum alloy 2602 contract opened higher at 21,160 yuan/mt overnight, then quickly fell to a low of 20,900 yuan/mt, and subsequently fluctuated around 21,000 yuan/mt, closing at 21,045 yuan/mt, forming a small bearish candlestick with both upper and lower shadows. The daily trading volume was 2,991, and open interest was 15,996.

Basis Daily: According to SMM data, on December 3, the SMM ADC12 spot price's theoretical premium to the most-traded cast aluminum alloy contract (AD2601) 10:15 closing price narrowed to 400 yuan/mt.

Warrant Daily: SHFE data showed that on December 3, the total registered warrant volume for cast aluminum alloy was 64,557 mt, an increase of 359 mt from the previous trading day. The total registered volume in Shanghai was 4,757 mt (unchanged), Guangdong 20,396 mt (unchanged), Jiangsu 10,939 mt (down 30 mt), Zhejiang 22,037 mt (up 389 mt), Chongqing 6,308 mt (unchanged), and Sichuan 120 mt (unchanged).

Aluminum Scrap: On Wednesday, the spot price of primary aluminum increased compared to the previous trading day, with SMM A00 spot closing at 21,800 yuan/mt, while the aluminum scrap market remained collectively stable. Entering December, downstream demand for aluminum scrap showed significant divergence. Demand for scrap used in cast aluminum alloys remained robust with a slight increase, providing more support for consumption. Some scrap-consuming enterprises in Shandong reported that raw material procurement was characterized by "priced but no market," with tight supply remaining the main theme and procurement prices staying high. Baled UBC was centrally quoted at 16,300-16,800 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was centrally quoted at 18,200-18,700 yuan/mt (ex-tax). Baled UBC prices increased by 50 yuan/mt WoW, while clean tapping aluminum wire, mixed aluminum extrusion scrap free of paint, mechanical casting aluminum scrap, scrap motorcycle wheel, and mixed aluminum tense scrap prices remained flat WoW. Today, many regions including Jiangxi, Anhui, Hubei, Foshan, Henan, and Guizhou chose to hold steady and wait, without adjusting prices.

Silicon Metal: On December 3, SMM non-oxygen blown #553 silicon metal in east China was at 9,300-9,400 yuan/mt; oxygen-blown #553 at 9,400-9,600 yuan/mt; #521 at 9,600-9,700 yuan/mt; #441 at 9,600-9,800 yuan/mt; #421 at 9,700-9,900 yuan/mt; #421 for silicone use at 9,800-10,200 yuan/mt; and #3303 at 10,300-10,600 yuan/mt. Individual silicon prices in Huangpu Port and Tianjin also declined. Prices in Kunming, Xinjiang, Sichuan, Shanghai, and north-west China remained stable.

Overseas Market: The current overseas ADC12 quotation range is $2,600–2,630/mt, with the import arbitrage loss maintained around 400 yuan/mt.

Inventory: According to SMM statistics, the combined daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 49,564 mt on December 3, up 154 mt from the previous trading day but down 123 mt WoW (compared to November 26).

Summary: Aluminum prices edged up slightly on Wednesday. The SMM spot price for A00 aluminum rose by 90 yuan/mt to 21,800 yuan/mt, while the ADC12 price held steady at 21,500 yuan/mt, widening the price inversion between the two. Recently, aluminum prices have held up well, boosting aluminum scrap traders' willingness to sell and improving market liquidity. However, with prices remaining elevated, the cost side continues to provide support. Demand side presents a mixed picture: on one hand, year-end rush to deliver orders from end-users will lend resilience to the market; on the other hand, high prices' dampening effect on downstream procurement, coupled with seasonally weaker demand, may constrain consumption. In December, supply side is unlikely to see significant increases due to raw material constraints, and the industry's low inventory levels will provide a floor for prices. Overall, ADC12 prices have limited downside room, but a breakthrough to the upside would require further cost-side increases or stronger-than-expected demand release. Short-term prices are expected to fluctuate at highs in a narrow range, with close attention on the pace of improvement in aluminum scrap supply, the actual implementation of policies, and changes in downstream enterprises' procurement pace.

[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, and are for reference only, not constituting decision-making advice.]