Aluminum Prices Hit New Highs in Recent Years, Downstream Production Cuts Intention Emerges [SMM Cast Aluminum Alloy Morning Comment]

January 7 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2603 contract opened at 24,280 yuan/mt, hit a high of 24,750 yuan/mt, a low of 24,210 yuan/mt, and closed at 24,695 yuan/mt, with a single-day gain of 1.48% and an intraday fluctuation range of 2.58% (620 points), showing a strong breakout and upward trend, with the price hitting a recent new high. Trading volume was 327,300 lots, an increase of 47,418 lots from the previous value; open interest was 253,400 lots, a slight increase of 392 lots. The amplified volume and energy, coupled with the price increase, indicate that bulls actively entered the market to push prices higher, with buying power dominating. Resistance above is noted at 24,750 yuan/mt; a break above could target higher levels. Support below is first seen at 24,500 yuan/mt, followed by 24,200 yuan/mt.

Basis Report: According to SMM data, on January 6, the SMM ADC12 spot price showed a theoretical premium of 590 yuan/mt to the closing price of the most-traded cast aluminum alloy contract (AD2603) at 10:15.

Warrant Report: SHFE data showed that on January 6, the total registered volume of cast aluminum alloy warrants was 69,198 mt, a decrease of 422 mt from the previous trading day. The total registered volume in Shanghai was 4,757 mt, unchanged from the previous trading day; in Guangdong, it was 22,238 mt, a decrease of 30 mt; in Jiangsu, it was 12,082 mt, a decrease of 119 mt; in Zhejiang, it was 23,782 mt, a decrease of 273 mt; in Chongqing, it was 5,919 mt, unchanged from the previous trading day; in Sichuan, it was 420 mt, unchanged from the previous trading day.

Aluminum Scrap: On Tuesday, the spot price of primary aluminum rose significantly compared to the previous trading day, with SMM A00 spot aluminum closing at 23,910 yuan/mt. The aluminum scrap market followed the rise in primary aluminum prices. Baled UBC was quoted centrally at 17,500-18,000 yuan/mt (tax excluded), and shredded aluminum tense scrap, priced based on aluminum content, was quoted centrally at 19,300-19,800 yuan/mt (tax excluded). Directly affected by the surge in primary aluminum, prices in Shanghai, Zhejiang, Jiangsu, Tianjin, Shandong, and Jiangxi increased by 400-600 yuan/mt today, while prices in Guizhou, Henan, and Hubei increased by 300-400 yuan/mt today. Domestic aluminum scrap prices were expected to fluctuate at highs following primary aluminum this week, while remaining cautious of the risk of a pullback from highs. On the supply side, the issue of tax burden shifting further affected the market supply structure.

Silicon Metal: On January 6, the silicon metal market was stagnant and consolidating. Yesterday, futures moved sideways and then strengthened. SMM oxygen-blown #553 silicon in East China was at 9,200-9,300 yuan/mt, and #441 silicon was at 9,300-9,500 yuan/mt. On the futures side, the most-traded silicon contract closed at 8,900 yuan/mt yesterday, up 170 yuan/mt from the previous day, mainly driven by factors such as fund sentiment. Downstream silicone enterprises held another meeting to hold prices firm this Friday, drawing attention to its potential impact on the silicon metal market.

Overseas Market: Current overseas ADC12 offers continued to rise to the range of $2,820–2,850/mt, with a slightly smaller increase compared to the domestic market, leading to a renewed expansion of the real-time import profit margin to around 300 yuan/mt.

Summary: On Tuesday, aluminum prices once again hit new highs in recent years, with the SMM A00 aluminum price surging another 600 yuan/mt in a single day to 23,910 yuan/mt, bringing the cumulative increase over the past two days to 1,450 yuan. This has driven the cost of recycled aluminum raw materials to continue climbing, with the SMM ADC12 price following suit and rising 400 yuan/mt to 23,500 yuan/mt. However, in the face of the sharp jump in raw material prices, downstream demand remains weak. Die-casting enterprises, squeezed by both reduced orders and high-priced raw materials, are purchasing cautiously with strong risk aversion sentiment. Inquiries are frequent, but actual market transactions are scarce. Some downstream players, unable to pass on the sudden cost increases further down the chain, are considering production cuts or even halting operations to alleviate operational pressure. Overall, the current secondary aluminum market is influenced by a mix of bullish and bearish factors: cost-driven support and tight supply underpin prices, while weak downstream demand and market fear of high prices exert downward pressure. Nevertheless, the continued release of macro tailwinds in the short term is expected to provide a boost to the market, with ADC12 prices likely to continue fluctuating at highs.

[Data Source Statement: Except for publicly available information, other data are derived by SMM through processing based on public information, market communication, and SMM's internal database models, and are for reference only, not constituting decision-making advice.]