Bullish and Bearish Factors Intertwined, Secondary Aluminum Market Activity Somewhat Suppressed [SMM Cast Aluminum Alloy Morning Comment]

1.8 SMM Cast Aluminum Alloy Morning Comment

Futures: The AD2603 contract for cast aluminum alloy surged to 23,480 before pulling back. On the 4-hour chart, it opened at 23,050, reached a high of 23,050, and a low of 22,560, closing at 22,965, down 70 points (-0.30%) from the previous close. Prices showed signs of a pullback from highs. Trading volume was 8,499, down 1,379 from the previous day; open interest was 20,509, down 109. The synchronized reduction in volume and open interest indicates lower participation of funds during the current pullback phase, with no clear consensus on direction between long and short positions. After hitting resistance, prices pulled back, technical indicators signaled an overbought condition, and the reduction in volume and open interest suggests that prices will likely fluctuate at highs or experience a slight downward trend in the short term.

Spot-Futures Price Spread Daily Report: According to SMM data, on January 7, the theoretical premium of the SMM ADC12 spot price over the most-traded casting aluminum alloy contract (AD2603) at 10:15 am closing price was 775 yuan/mt.

Warrant Daily Report: SHFE data shows that on January 7, the total registered warrants for cast aluminum alloy were 69,346 mt, up 148 mt from the previous trading day. In Shanghai, the total registered warrants were 4,757 mt, unchanged from the previous trading day; in Guangdong, 22,238 mt, also unchanged; in Jiangsu, 12,020 mt, down 62 mt; in Zhejiang, 23,691 mt, down 91 mt; in Chongqing, 5,919 mt, unchanged; and in Sichuan, 721 mt, up 301 mt.

Aluminum Scrap: On Wednesday, the spot price of primary aluminum continued to rise compared to the previous trading day, with SMM A00 spot closing at 24,140 yuan/mt. The aluminum scrap market followed the increase in primary aluminum prices. Baled UBC scrap prices ranged from 17,800 to 18,200 yuan/mt (excluding tax), while shredded aluminum tense scrap (priced based on aluminum content) ranged from 19,400 to 19,900 yuan/mt (excluding tax). Directly influenced by the rise in primary aluminum, prices in Shanghai, Zhejiang, Jiangsu, Tianjin, Shandong, and Jiangxi increased by 100-200 yuan/mt today. It is expected that domestic aluminum scrap prices this week will follow the high-level fluctuations of primary aluminum, while also being cautious of the risk of a pullback from highs. On the supply side, the issue of tax burden transfer further affects the market supply structure.

Silicon Metal:

The silicon metal market remained stagnant. Yesterday, the futures trended sideways but ended stronger. SMM east China oxygen-blown #553 silicon was priced at 9,200-9,300 yuan/mt, and #441 silicon at 9,300-9,500 yuan/mt. In the futures, the most-traded silicon contract closed at 8,900 yuan/mt, up 170 yuan/mt from the previous day, mainly driven by sentiment and other factors. This Friday, downstream silicone enterprises will hold another meeting to hold prices firm, which may impact the silicon metal market.

Overseas market: Overseas ADC12 prices are currently stable in the range of $2,820–2,850/mt, while domestic prices continue to rise significantly, pushing the real-time profit margin for imports to expand again to around 500 yuan/mt.

Summary: With aluminum prices currently breaking through the high of 24,000 yuan/mt, pressure on both supply and demand ends in the secondary aluminum industry has intensified, and market sentiment has diverged. Supply side, finished product inventories at secondary aluminum enterprises are generally low, coupled with tight aluminum scrap supply and persistently high prices, further driving rapid increases in secondary aluminum alloy prices. Demand side, downstream resistance to high prices is strong, with most enterprises shifting to digesting inventories, postponing purchases, or only maintaining essential demand; some enterprises even plan to halt production early. Only a few customers concerned about further price increases are actively placing orders, resulting in an overall sluggish transaction atmosphere in the market. The current "soaring" aluminum prices are causing poor cost transmission along the industry chain, increasing instances of production cuts and shutdowns downstream. Moreover, as the Chinese New Year approaches, market expectations for pre-holiday stockpiling have significantly weakened, markedly dampening market vitality. If prices remain firm, the production and sales pace in the secondary aluminum industry may further slow down in the short term. Overall, the current secondary aluminum market is intertwined with bullish and bearish factors: cost-driven and tight supply provide support for prices, while weak downstream demand and fear of high prices exert downward pressure. However, the continued release of short-term macro tailwinds will boost the market, and ADC12 prices are expected to continue fluctuating 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.]