Year-End Aluminum Scrap Demand Rises, Cost Support for Secondary Aluminum Becomes Significant [SMM Cast Aluminum Alloy Morning Comment]

12.24 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded cast aluminum alloy 2601 futures contract opened at 21,300 yuan/mt overnight, hit a high of 21,395 yuan/mt, touched a low of 21,105 yuan/mt, and finally closed at 21,190 yuan/mt, down 45 yuan/mt. Trading volume was 14,228, a decrease of 8,550 from the previous session, and open interest was 15,640, down 1,576, indicating a simultaneous decline in both volume and open interest, reflecting reduced capital participation and weaker trading willingness in the high range. The resistance near 21,400 yuan/mt was strong, and the market may enter a consolidation phase in the short term. Support around the 21,100 yuan/mt level needs to be monitored; a break below this level could trigger a further pullback.

Basis Report: According to SMM data, on Dec. 23, the SMM ADC12 spot price showed a theoretical premium of 615 yuan/mt over the closing price of the most-traded cast aluminum alloy futures contract (AD2602) at 10:15.

Warrant Report: SHFE data showed that on Dec. 23, the total registered warrant volume for cast aluminum alloy was 70,161 mt, flat from the previous trading day. The breakdown by region was Shanghai (4,757 mt, unchanged), Guangdong (22,510 mt, unchanged), Jiangsu (11,991 mt, unchanged), Zhejiang (24,564 mt, unchanged), Chongqing (5,919 mt, unchanged), and Sichuan (420 mt, unchanged).

Aluminum Scrap Side: The spot primary aluminum price dropped back slightly on Tuesday compared to the previous trading day, with the SMM A00 spot price closing at 21,870 yuan/mt. The aluminum scrap market followed with a slight overall decline. Baled UBC was quoted in the range of 16,350-16,850 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 18,100-18,600 yuan/mt (ex-tax). Overall, the tug-of-war between sellers and buyers in the aluminum scrap market is expected to continue this week. Key factors to track include fluctuations in the primary aluminum price, the implementation of environmental protection-driven production restrictions, and changes in the procurement pace of downstream enterprises, while remaining cautious of the risk of a pullback from high levels.

Silicon Metal Side: Spot silicon metal prices fluctuated rangebound. Yesterday, SMM oxygen-blown #553 silicon in east China was priced at 9,200-9,300 yuan/mt, and #441 silicon was priced at 9,300-9,500 yuan/mt. The futures market held up well in the past two days. The most-traded silicon futures contract closed at 8,780 yuan/mt yesterday, up 185 yuan/mt from the previous day. Silicon enterprise offers were largely stable. Trading firms engaging in both spot and futures markets raised their absolute price offers due to the futures increase. Downstream buyers mainly watched the market and made purchases as needed, resulting in a thin trading atmosphere.

Overseas Market: For imports, overseas ADC12 offers were currently at $2,630–2,650/mt. In December, driven by cost increases and regional policy adjustments, domestic spot prices followed the upward trend to 21,000-21,200 yuan/mt. Although the strengthening of the yuan and gains on the SHFE narrowed the immediate import losses, the overall situation remained in an inverted range. Imports in December were expected to remain in the range of 70,000-80,000 mt, with the total annual import volume for 2025 projected to fall below 1 million mt, representing a YoY decline of approximately 18%.

Summary: In yesterday's spot market, the SMM A00 aluminum price pulled back by 60 yuan/mt to 21,870 yuan/mt, while the ADC12 price held firm at 21,800 yuan/mt. Today, aluminum prices edged down slightly, but the secondary aluminum market generally remained stable. Currently, raw material supply is tightening, coupled with secondary aluminum enterprises entering a stockpiling phase, leading to increased aluminum scrap demand. Traders showed clear sentiment to hold prices firm, providing support for secondary aluminum costs. However, demand side weakened marginally, and overall market transactions performed sluggishly. Supply side, recent heavy pollution weather warnings were activated in multiple regions, with some secondary aluminum enterprises facing production restrictions or shutdowns, resulting in a slight contraction in supply. Overall, cost support and tightening supply jointly solidified the price floor, but slowing demand and aluminum prices fluctuating at highs suppressed downstream purchase willingness. ADC12 prices are expected to hover at highs in the short term.

[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.]