[Aluminum Scrap Yards Expect Early Holidays, Tightened Liquidity Restricts Market Transactions [SMM Cast Aluminum Alloy Morning Comment]

1.27 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded cast aluminum alloy 2603 contract opened at 23,060 yuan/mt overnight. After opening, the price quickly fell to a low of 23,000 yuan/mt, then fluctuated and rebounded to a high of 23,200 yuan/mt, ultimately closing at 23,115 yuan/mt, up 105 yuan/mt or 0.46% from the previous close.

Basis Report: According to SMM data, on January 26, the SMM ADC12 spot price showed a theoretical premium of 985 yuan/mt over the 10:15 AM closing price of the most-traded cast aluminum alloy contract (AD2603).

Warrant Report: SHFE data showed that on January 26, the total registered warrant volume for cast aluminum alloy was 67,503 mt, a decrease of 389 mt from the previous trading day. By region: Shanghai total registered volume was 4,513 mt (unchanged); Guangdong total registered volume was 23,556 mt (decreased by 30 mt); Jiangsu total registered volume was 11,028 mt (decreased by 149 mt); Zhejiang total registered volume was 21,826 mt (decreased by 60 mt); Chongqing total registered volume was 5,889 mt (unchanged); Sichuan total registered volume was 691 mt (unchanged).

Aluminum Scrap: Last Friday, the spot price of primary aluminum decreased slightly compared to the previous trading day, with SMM A00 spot closing at 24,030 yuan/mt. Today, the aluminum scrap market showed significant divergence in pricing adjustments. Baled UBC was concentrated in the range of 17,450-178,500 yuan/mt (ex-tax). Shredded aluminum tense scrap (priced based on aluminum content) was concentrated in the range of 19,400-20,000 yuan/mt (ex-tax). Regarding the price difference between A00 aluminum and aluminum scrap: On January 26, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,538 yuan/mt; the price difference between A00 aluminum and shredded aluminum tense scrap was 2,731 yuan/mt. Henan, Foshan, Jiangxi, Anhui, and other regions saw prices catching up to last week's aluminum price gains yesterday, while other regions adjusted their offers downward following the aluminum price. Under the current scenario of high aluminum prices forcing scrap prices to follow suit, a situation of "nominal prices without actual market activity" has emerged, dampening downstream buying sentiment and leading to purchasing as needed. 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) projected at 19,200-19,800 yuan/mt (ex-tax). Downward pressures persist: as the Chinese New Year approaches, enterprises are gradually entering holiday shutdown periods; early holidays at scrap yards are reducing market liquidity; downstream operating rates remain low with strong resistance to high prices. Close attention should be paid to the trend of primary aluminum, weather changes, and the pace of pre-holiday production halts and holidays, while remaining vigilant about the risk of a pullback from highs.

Silicon Metal: On January 26, SMM East China non-oxygen blown #553 was at 9,100-9,300 yuan/mt; oxygen-blown #553 was at 9,200-9,300 yuan/mt; #521 was at 9,300-9,500 yuan/mt; #441 was at 9,400-9,500 yuan/mt; #421 was at 9,500-9,800 yuan/mt; #421 for silicone use was at 9,800-10,200 yuan/mt; #3303 was at 10,200-10,500 yuan/mt. Silicon prices in Tianjin and north-west China have also been raised.

Overseas market: Current overseas ADC12 quotes remain stable at $2,850–$2,880/mt, with immediate import profits around 300 yuan/mt.

Summary: On Monday, A00 aluminum prices fell by 80 yuan/mt to 24,030 yuan/mt, while SMM ADC12 prices held steady at 24,000 yuan/mt. In the context of falling prices, the secondary aluminum market showed little interest in adjusting prices, with most manufacturers maintaining their current pricing. Demand side, high prices and insufficient pre-holiday stockpiling motivation led to downstream purchases being mainly driven by rigid demand, resulting in a sluggish trading atmosphere. Supply side faced multiple disruptions: expectations of regional tax policy adjustments, enhanced compliance checks on reverse invoicing in some areas, snowfall impacting logistics, and repeated environmental protection-driven production restrictions in regions like central China, causing some enterprises to cut production or halt operations early for the holiday. It is expected that the industry's operating rate will show a downward trend in the short term. Overall, although high aluminum prices and seasonal off-season demand are suppressing market activity, support from aluminum scrap prices on the cost side, coupled with supply tightens due to policy and environmental factors, is expected to keep secondary aluminum alloy prices fluctuating at highs in the near future. Subsequent attention should be paid to the flow of raw materials, changes in downstream operations, and the evolution of pre-holiday stockpiling sentiment.

[Data source statement: Apart from publicly available information, other data is derived from public information, market communication, and SMM's internal database model, processed by SMM for reference only and does not constitute decision-making advice.]