Copper and Aluminum Prices Continue to Strengthen, Demand Fails to Conceal Weakness [SMM Cast Aluminum Alloy Morning Comment]

January 6 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2603 contract showed a strong breakout rally, opening at 22,490, hitting a high of 23,060, and closing at 22,970, up 2%. The price reached a recent high, breaking above the upper boundary of the previous consolidation range. Trading volume was 8,326 (down 3,494 from the previous value), and open interest was 19,503 (up 1,204), indicating a pattern of rising on increased positions, suggesting active entry of bullish funds and supported by capital flows. K=80.84, D=69.81, J=102.90, with the J-line already in the overbought zone (above 100), and the K and D lines approaching the overbought threshold of 80, indicating short-term technical correction pressure. The breakout on increased positions confirms strong trend momentum; if the price stabilizes above 22,900 in the short term, further upward movement is expected, with resistance eyed at the 23,200 integer level.

Basis Daily Report: According to SMM data, on January 5, the SMM ADC12 spot price showed a theoretical premium of 560 yuan/mt over the closing price of the most-traded cast aluminum alloy contract (AD2603) at 10:15.

Warrant Daily Report: SHFE data showed that on January 5, the total registered warrants for cast aluminum alloy were 69,620 mt, up 32 mt from the previous trading day. Among them, the total registered volume in Shanghai was 4,757 mt, unchanged from the previous trading day; Guangdong's total registered volume was 22,268 mt, up 31 mt; Jiangsu's total registered volume was 12,201 mt, down 91 mt; Zhejiang's total registered volume was 24,055 mt, up 92 mt; Chongqing's total registered volume was 5,919 mt, unchanged; Sichuan's total registered volume was 420 mt, unchanged.

Aluminum Scrap: This Monday, the spot price of primary aluminum rose compared to the previous trading day, with SMM A00 spot closing at 22,460 yuan/mt. The aluminum scrap market followed the rise in primary aluminum prices. Baled UBC was quoted at 16,800-17,200 yuan/mt (ex-tax), and shredded aluminum tense scrap (priced based on aluminum content) was quoted at 18,400-18,900 yuan/mt (ex-tax). Prices in Shanghai, Zhejiang, Jiangsu, Tianjin, and Shandong were raised by 200-300 yuan/mt this Monday, while prices in Guizhou, Henan, Jiangxi, and Hubei were raised by 100 yuan/mt or remained largely stable. The domestic aluminum scrap market is expected to hover at highs around the New Year holiday, but caution is needed against high-level correction risks. In terms of price trends, the center for shredded aluminum tense scrap (priced based on aluminum content) will maintain at 18,200-18,700 yuan/mt (ex-tax). Short-term focus should be on signals of the easing of environmental protection-driven production restriction policies, changes in procurement pace of downstream enterprises, and the impact of tax burden shifting on the price floor.

Silicon Metal: On January 5, SMM east China non-oxygen blown #553 was at 9,100-9,300 yuan/mt; oxygen-blown #553 at 9,200-9,300 yuan/mt; #521 at 9,300-9,500 yuan/mt; #441 at 9,300-9,500 yuan/mt; #421 at 9,500-9,800 yuan/mt; #421 for silicone use at 9,800-10,200 yuan/mt; #3303 at 10,200-10,500 yuan/mt. Prices of silicon in Kunming, Huangpu Port, Tianjin, Shanghai, Xinjiang, Sichuan, and north-west China remained stable. The price of silicon (Si≥97%) today held steady. Overseas market: Current overseas ADC12 offers surged to the range of $2,780–2,820/mt, with a larger increase than the domestic market, causing the real-time profit margin for imports to shrink sharply to less than 100 yuan/mt.

Summary: In the spot market, aluminum and copper prices continued their strong performance yesterday, again hitting new highs in recent years. Among them, the SMM A00 aluminum price rose sharply by 850 yuan/mt to 23,310 yuan/mt in a single day, driving up the cost of recycled aluminum raw materials continuously. The SMM ADC12 price followed with an increase of 650 yuan/mt to 23,100 yuan/mt. After the holiday, the market returned, but downstream demand remained weak in the face of a sharp jump in raw material prices. Die-casting enterprises, squeezed by both reduced orders and high-priced raw materials, adopted a cautious purchasing mindset, with strong risk aversion sentiment. Most engaged in restocking based on rigid demand only, leading to a sluggish trading atmosphere in the market. Overall, although the current secondary aluminum market has support from the cost and supply sides, weak downstream demand combined with market fear of high prices will suppress further price increases. In the short term, ADC12 prices are expected to hover at highs.

[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.]