Downstream Foundry Operations Shrink, Cast Aluminum Alloy Prices Adjust with Primary Aluminum [SMM Cast Aluminum Alloy Morning Comment]

SMM Cast Aluminum Alloy Morning Comment for December 8

Futures: The most-traded cast aluminum alloy AD2601 futures contract opened at 21,135 yuan/mt overnight, hit a low of 20,940 yuan/mt, and finally closed at 21,025 yuan/mt, down 115 yuan/mt or 0.54% from the previous close. Trading volume was 460, and open interest was 2,576. The weekly candlestick chart showed a "long upper shadow plus a pullback in the real body," indicating strong resistance above 21,135 yuan/mt, with bulls retreating after hitting highs. The KDJ indicator (K: 66.05, D: 66.09, J: 65.96) was in a neutral range, showing no clear bullish or bearish signals; the VR indicator (310.56) was relatively high, possibly suggesting a correction after short-term overheating sentiment. The current futures market shows characteristics of "sideways movement plus shrinking volume adjustment," with resistance watched at 21,135 yuan/mt and support at 20,940 yuan/mt. If open interest continues to shrink, rangebound fluctuations may persist.

Basis Report: According to SMM data, on December 5, the SMM ADC12 spot price theoretically traded at a premium of 555 yuan/mt to the closing price of the most-traded cast aluminum alloy futures contract (AD2601) at 10:15.

Warrant Report: SHFE data showed that on December 5, the total registered warrants for cast aluminum alloy were 66,436 mt, an increase of 272 mt from the previous trading day. The total registered warrants by region were: Shanghai (4,757 mt, unchanged), Guangdong (21,102 mt, down 31 mt), Jiangsu (11,509 mt, up 570 mt), Zhejiang (22,340 mt, up 303 mt), Chongqing (6,308 mt, unchanged), and Sichuan (420 mt, unchanged).

Aluminum Scrap: Last Friday, the spot price of primary aluminum rose compared to the previous trading day, with the SMM A00 spot price closing at 22,090 yuan/mt, while the aluminum scrap market held steady overall. Baled UBC was quoted in the range of 16,450-16,950 yuan/mt (tax excluded), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 18,000-18,650 yuan/mt (tax excluded). On December 5, the price difference between A00 aluminum and shredded aluminum tense scrap closed at 1,814 yuan/mt, and the price difference between A00 aluminum and bare bright aluminum wire in Jiangsu was 885.6 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly trading in the range of 18,500-19,200 yuan/mt (tax excluded). The tug-of-war between sellers and buyers continues, and it is necessary to closely track fluctuations in primary aluminum, environmental protection policies, and downstream procurement pace, while remaining cautious of the risk of a pullback from highs.

Silicon Metal: (1) Prices: On December 5, SMM non-oxygen blown #553 silicon metal in east China was priced at 9,300-9,400 yuan/mt; oxygen-blown #553 at 9,400-9,500 yuan/mt; #521 at 9,600-9,700 yuan/mt; #441 at 9,600-9,700 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. (1) Silicon prices in Kunming, Huangpu Port, Tianjin, Xinjiang, Sichuan, Shanghai, and north-west China remained stable. (2) Inventory: According to SMM statistics, the total social inventory of silicon metal in major regions amounted to 558,000 mt as of December 4, an increase of 8,000 mt WoW. This included 131,000 mt in general social warehouses, up 2,000 mt WoW, and 427,000 mt in social delivery warehouses (including portions not registered as warrants and spot inventory), an increase of 6,000 mt WoW. (Excluding Inner Mongolia, Ningxia, Gansu, etc.)

Overseas market: The current overseas ADC12 quotation range stood at $2,600–2,640/mt. As domestic prices rose, the immediate import loss narrowed to around 200 yuan/mt.

Inventory side: According to SMM statistics, the daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 49,217 mt on December 8, down 269 mt from the previous trading day and a decrease of 502 mt from the previous Monday (December 5).

Summary: Spot side, the SMM A00 aluminum spot price rose again by 70 yuan/mt to 22,090 yuan/mt last Friday, hitting a new high for the year. The ADC12 price held steady at 21,700 yuan/mt, and the price inversion between the two continued to widen. Cost side, aluminum scrap prices partially increased today following the aluminum price rise, while copper prices continued their upward trend, reaching a new high of 91,585 yuan/mt, leading to sustained raw material cost increases. The cost share of aluminum scrap and copper auxiliary materials continued to rise, with cost remaining the primary driver for ADC12 price increases. Demand side, aluminum prices surging to yearly peaks suppressed short-term procurement pace among downstream buyers. Some die-casting enterprises saw profit margins shrink due to cost pressure, and some fell into losses, leading to a decline in operating rates. However, end-user demand for pushing annual targets at year-end still supported industry resilience. Overall, ADC12 prices are expected to continue fluctuating at highs in the short term. Looking at the spot-futures price spread during the week, the futures showed an upward trend in the first three days, but spot prices remained relatively stable, resulting in an expansion of the futures discount. Subsequently, cast aluminum alloy futures came under pressure and diverged significantly from SHFE aluminum trends—SHFE aluminum futures surged strongly to a high of 22,350 yuan/mt, driving rapid increases in aluminum scrap prices. Combined with rising copper prices, this substantially pushed up production costs. Against this backdrop, spot ADC12 prices followed with rapid increases, and the spot-futures price spread narrowed significantly.

[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.]