Futures Stabilize, Spot Premiums Widen [SMM Cast Aluminum Alloy Morning Comment]

January 28 SMM Cast Aluminum Alloy Morning Comment

Futures: Overnight, the most-traded aluminum alloy 2603 futures contract opened, surged to 23,230 yuan/mt, then quickly pulled back to hit a bottom of 22,925 yuan/mt, before rebounding in fluctuations and finally closing at 23,060 yuan/mt, up 5 yuan/mt or 0.02% from the previous close. The K-value at 41.27 and D-value at 30.7 are in the neutral-to-low range, not yet entering overbought or oversold territory, showing signs of stabilizing and rebounding in the short term. Open interest decreased by 210 to 9,249, accompanied by a price pullback, indicating reduced bear positions and a convergence of long-short divergence.

Basis Daily Report: According to SMM data, on January 27, the SMM ADC12 spot price showed a theoretical premium widening to 1,100 yuan/mt against the closing price of the most-traded cast aluminum alloy contract (AD2603) at 10:15.

Warrant Daily Report: SHFE data showed that on January 27, the total registered warrant volume for cast aluminum alloy was 67,534 mt, an increase of 31 mt from the previous trading day. By region: Shanghai total registered volume was 4,513 mt, unchanged; Guangdong total registered volume was 23,526 mt, down 30 mt; Jiangsu total registered volume was 10,998 mt, down 30 mt; Zhejiang total registered volume was 21,917 mt, up 91 mt; Chongqing total registered volume was 5,889 mt, unchanged; Sichuan total registered volume was 691 mt, unchanged.

Aluminum Scrap Side: On Tuesday, spot primary aluminum prices fell compared to the previous trading day, with SMM A00 spot aluminum closing at 23,870 yuan/mt. Aluminum scrap market prices generally followed the decline. Baled UBC scrap was mainly quoted between 17,350-17,850 yuan/mt (tax excluded), shredded aluminum tense scrap (priced based on aluminum content) was mainly quoted between 19,400-20,000 yuan/mt (tax excluded). Regarding the price difference between primary aluminum and scrap: On January 27, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,445 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,531 yuan/mt. Quotations in Henan, Foshan, Jiangxi, Anhui, and other regions followed the decline in aluminum prices. Currently, with aluminum prices high, scrap aluminum is forced to follow the rise, creating a situation of "nominal prices without actual market." Downstream buying sentiment was dampened, leading to purchasing as needed. As the Chinese New Year approaches, enterprises are gradually entering holiday schedules; early holidays for scrap yards have reduced market liquidity, downstream operations remain sluggish, and resistance to high prices is strong. Close tracking of primary aluminum trends, weather changes, and pre-holiday production halts/holiday schedules is necessary, while being alert to the risk of a pullback from high levels.

Silicon Metal Side: Yesterday, SMM East China oxygen-blown #553 silicon was at 9,200-9,300 yuan/mt, flat from the previous day; #441 silicon was at 9,400-9,600 yuan/mt, up 50 yuan/mt from the previous day. On the futures side, during the week, the most-traded futures contract rose to a high of 9,000 yuan/mt, and some silicon enterprises in the north increased shipments based on the spot-futures price spread for futures point pricing. In the spot market, the price center for certain specifications of silicon saw a slight increase in downstream user procurement, while mainstream prices remained stable.

Overseas market: Current overseas ADC12 offers continue to hold steady at $2,850–2,880/mt, with import arbitrage profits hovering around 300 yuan/mt.

Summary: On Tuesday, aluminum prices extended their decline, but secondary aluminum enterprises showed strong willingness to hold prices firm, with offers largely stable. Demand side, constrained by high prices and weak pre-holiday stockpiling momentum, downstream procurement was mainly driven by rigid demand, resulting in overall sluggish trading activity. Supply side faces multiple disruptions: expectations of adjustments in regional tax policies, enhanced compliance checks on reverse invoicing in some areas, logistics disruptions due to snowfall, and repeated environmental protection-driven production restrictions in regions like Central China, leading some enterprises to cut production or halt operations early for holidays. The industry's operating rate is expected to show a downward trend in the short term. Overall, although high aluminum prices and seasonal off-season demand suppress market activity, cost-side support from aluminum scrap prices, coupled with supply tightness triggered by policy and environmental factors, is expected to keep secondary aluminum alloy prices fluctuating at highs in the near term. Subsequent focus should be on raw material circulation, changes in downstream operating rates, and the evolution of pre-holiday stockpiling 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 intended as decision-making advice.]