Cost Support Coupled with Policy Disturbances, Cast Aluminum Alloy Prices Fluctuate at Highs in the Short Term [SMM Cast Aluminum Alloy Morning Comment]

January 26 SMM Cast Aluminum Alloy Morning Comment

Futures: On Friday night, the most-traded aluminum alloy 2603 contract opened at 23,065 yuan/mt. After opening, the price quickly fell to the intraday low of 22,995 yuan/mt, then fluctuated and rebounded to a high of 23,230 yuan/mt, and finally closed at 23,130 yuan/mt, up 135 yuan/mt or 0.59% from the previous close.

Spot-Futures Price Spread Daily Report: According to SMM data, on January 23, the SMM ADC12 spot price showed a theoretical premium of 960 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 23, the total registered warrant volume for cast aluminum alloy was 67,892 mt, a decrease of 540 mt from the previous trading day. By region: Shanghai's total registered volume was 4,513 mt, unchanged from the previous trading day; Guangdong's total registered volume was 23,586 mt, down 31 mt; Jiangsu's total registered volume was 11,177 mt, down 301 mt; Zhejiang's total registered volume was 22,036 mt, down 208 mt; Chongqing's total registered volume was 5,889 mt, unchanged; Sichuan's total registered volume was 691 mt, unchanged.

Aluminum scrap: On Friday, spot aluminum prices rose significantly compared to the previous trading day, with SMM A00 spot aluminum closing at 24,110 yuan/mt. Aluminum scrap market prices followed the increase collectively. Baled UBC was quoted in the range of 17,350-178,500 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 19,300-19,800 yuan/mt (ex-tax). Regarding the price difference between A00 aluminum and aluminum scrap: on January 23, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,725 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,919 yuan/mt. Against the backdrop of high aluminum prices forcing scrap prices to follow, the market has shown a situation of "nominal prices without actual trading." Downstream buying sentiment was dampened, with purchasing as needed. The aluminum scrap market is expected to hover at highs this week, with shredded aluminum tense scrap (priced based on aluminum content) mainly ranging 19,200-19,800 yuan/mt (ex-tax). Downward pressures remain: as the Chinese New Year approaches, enterprises are gradually entering holiday schedules; scrapyards closing early reduce market liquidity; downstream operations remain sluggish with strong resistance to high prices. It is necessary to closely track primary aluminum price trends, weather changes, and pre-holiday production halts and holiday schedules, while being vigilant about the risk of a high-price correction.

Silicon metal: (1) Spot silicon metal prices were largely stable. SMM oxygen-blown #553 silicon in east China was at 9,200-9,300 yuan/mt, and #421 silicon was at 9,500-9,800 yuan/mt. In a weak supply and demand market, views on future prices are cautious; downstream purchase order releases are not concentrated, and market trading atmosphere is moderate. (2) Social inventory: According to SMM statistics, on January 22, the total social inventory of silicon metal in major regions was 556,000 mt, an increase of 1,000 mt WoW. (excluding Inner Mongolia, Ningxia, Gansu, etc.).

Overseas market: Current overseas ADC12 offers remain steady at $2,860–2,890/mt, with import arbitrage profits around 300 yuan/mt.

Summary: Last Friday, A00 aluminum prices surged by 370 yuan/mt to 24,110 yuan/mt, while the SMM ADC12 price was raised by 150 yuan/mt to 24,000 yuan/mt. As the rebound in aluminum prices gained strength, secondary aluminum quotations diverged: enterprises that held quotes steady during the early-week price decline maintained stability during this rally; those that had previously adjusted offers with the market actively followed the upward trend, raising quotes by about 200 yuan/mt. Approaching the Chinese New Year, secondary aluminum enterprises gradually began raw material stocking, but due to persistently high aluminum prices, market wait-and-see sentiment was strong, leading firms to only slightly increase raw material inventories. Demand side, affected by fear of high prices and weak pre-holiday stocking demand, downstream procurement was primarily for rigid needs, resulting in sluggish market activity. Supply side faced multiple disruptions: expectations of regional tax policy adjustments, enhanced compliance checks on reverse invoicing in some areas, transportation hindered by snowfall, and repeated environmental protection-driven production restrictions in central China and other regions, all prompting some enterprises to implement production cuts or halt operations early for the holiday. The industry operating rate is expected to trend downward in the short term. Looking ahead, although high aluminum prices and seasonal off-season demand suppress market activity, cost-side aluminum scrap prices provide support, coupled with supply tightening due to policy and environmental factors. Secondary aluminum alloy prices are expected to continue fluctuating at highs in the near term. Subsequent focus should be on raw material flow, changes in downstream operating rates, and the evolution of pre-holiday stocking sentiment.

[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 not as decision-making advice.]