Aluminum prices continue to decline, with actual transactions remaining sluggish [SMM Cast Aluminum Alloy Morning Comment]

1.19 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2603 contract closed at 22,710 yuan/mt, down 25 yuan, a decrease of 0.11%. Open interest was 20,565, down 321 from the previous week, indicating some capital withdrawal at the current price level. Trading volume was 5,618, within the normal recent range, with no one-sided dominance in the tug-of-war between longs and shorts. The K-value was 29.13, D-value 46.01, and J-value -4.62. The J-line has entered oversold territory (<0), suggesting a potential technical rebound in the short term, but the K- and D-lines continue to diverge downward, showing no clear reversal signal yet.

Basis Daily: According to SMM data, on January 16, the SMM ADC12 spot price had a theoretical premium of 890 yuan/mt over the closing price of the cast aluminum alloy most-traded contract (AD2603) at 10:15.

Warrant Daily: SHFE data showed that on January 16, the total registered warrant volume for cast aluminum alloy was 70,032 mt, down 636 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 23,829 mt, down 122 mt; Jiangsu's total registered volume was 12,138 mt, down 211 mt; Zhejiang's total registered volume was 22,638 mt, down 303 mt; Chongqing's total registered volume was 5,979 mt, unchanged from the previous trading day; Sichuan's total registered volume was 691 mt, unchanged from the previous trading day.

Aluminum Scrap Side: Last Friday, spot primary aluminum prices continued a slight correction compared to the previous trading day, with SMM A00 spot closing at 24,030 yuan/mt. Aluminum scrap market prices overall held steady or followed with minor declines. Baled UBC scrap was quoted at 17,200-17,700 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted at 19,150-19,650 yuan/mt (ex-tax). In terms of the price difference between A00 aluminum and aluminum scrap, on January 16, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,743 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,614 yuan/mt. The aluminum scrap market is expected to hover at highs this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) at 19,600-20,100 yuan/mt (ex-tax). The overall tug-of-war between sellers and buyers continues, requiring close tracking of primary aluminum trends, downstream production halts, and pre-holiday trading activity, while remaining vigilant against the risk of a high-level correction.

Silicon Metal Side: Prices: Spot silicon metal prices remained largely stable, with SMM East China oxygen-blown #553 silicon at 9,200-9,300 yuan/mt and #421 silicon at 9,500-9,800 yuan/mt. The most-traded silicon contract fluctuated rangebound near 8,600-8,800 yuan/mt, influenced by positive macro sentiment but weak fundamentals. Downstream users purchased as needed, and market trading atmosphere was moderate. Production: Last week, there were additional production cuts at some silicon furnaces in Sichuan and Inner Mongolia, with operating rates in Sichuan and Yunnan dropping to relatively low levels.

Overseas Market: On the import side, overseas ADC12 prices held steady at $2,860–2,890/mt, while domestic spot prices fell to 23,000–23,200 yuan/mt, with import arbitrage profits in the range of 300–500 yuan/mt.

Summary: Last Friday, aluminum prices saw another sharp correction, with A00 prices dropping 160 yuan/mt to 24,030 yuan/mt and SMM ADC12 prices falling 100 yuan/mt to 23,900 yuan/mt. Although two consecutive weekly declines cooled market sentiment, absolute prices remained above 24,000 yuan/mt. Secondary aluminum market quotations diverged: some enterprises chose to hold steady and wait, citing firm costs, low inventory, or bullish expectations, while others lowered prices by 100–300 yuan/mt in response to weak demand. On the demand side, the price decline intensified wait-and-see sentiment. Although some die-casting enterprises restocked under production pressure, leading to a marginal improvement in inquiry activity and purchase willingness, actual transactions remained sluggish due to downstream losses, causing a noticeable drop in orders for some secondary aluminum plants. In the short term, secondary aluminum alloy prices are expected to hover at highs. On one hand, cost support weakened, and the market was weighed down by both the off-season and losses, resulting in sluggish trading activity; on the other hand, uncertainties in regional tax policies, supply constraints from environmental protection-driven production restrictions, and macro tailwinds continued to provide a floor for prices.

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