Overnight, the most-traded aluminum alloy contract retreated after a rapid rise, and market transactions continued to cool down. [SMM Cast Aluminum Alloy Morning Comment]

January 30 SMM Cast Aluminum Alloy Morning Comment

Futures: The most-traded cast aluminum alloy 2603 contract opened at 23,900 yuan/mt overnight, surged to 24,410 yuan/mt initially, then pulled back sharply, hitting a low of 22,820 yuan/mt. Prices fluctuated at lows afterward, and finally closed at 23,165 yuan/mt, down 685 yuan/mt or 2.87% from the previous close, mainly due to long position reduction.

Spot-Futures Price Spread Daily: According to SMM data, on January 29, the theoretical spot-futures price spread between the SMM ADC12 spot price and the closing price of the most-traded cast aluminum alloy contract (AD2603) at 10:15 was 960 yuan/mt.

Warrant Daily: SHFE data showed that on January 29, the total registered warrants for cast aluminum alloy were 68,594 mt, an increase of 935 mt from the previous trading day. By region: Shanghai (5,120 mt, unchanged), Guangdong (23,526 mt, unchanged), Jiangsu (10,667 mt, down 120 mt), Zhejiang (22,701 mt, up 1,055 mt), Chongqing (5,889 mt, unchanged), and Sichuan (691 mt, unchanged).

Aluminum scrap side: Spot primary aluminum prices rose significantly again on Thursday compared to the previous trading day, with SMM A00 aluminum closing at 24,860 yuan/mt, and aluminum scrap prices generally followed the upward trend. Baled UBC was quoted at 17,650-18,150 yuan/mt (ex-tax), shredded aluminum tense scrap (priced based on aluminum content) was quoted at 19,800-20,500 yuan/mt (ex-tax). Regarding the price difference between A00 aluminum and aluminum scrap: on January 29, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,633 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,719 yuan/mt. Shanghai, Jiangsu, Shandong, and Jiangxi closely followed the aluminum price increase, while Henan, Guizhou, Anhui, and Hunan adjusted prices more cautiously that day, rising by 100-200 yuan/mt. Recently, directly affected by recycling policies and forced to follow the high aluminum prices, the market has shown a situation of "nominal prices without actual trading." Scrap utilization enterprises in related provinces were forced to reduce or halt production, downstream buying sentiment was dampened, and purchasing was done as needed. Against the backdrop of persistently high primary aluminum prices and recycling policies restricting aluminum scrap market liquidity, aluminum scrap prices will receive more bottom support. However, with repeated production restrictions in central China and persistently low downstream operating rates, the "nominal prices without actual trading" supply-demand pattern is difficult to change, stocking demand is hard to release, and the overall tug-of-war between sellers and buyers intensified.

Silicon metal side: This week, spot silicon metal prices remained mostly stable, with individual grades rising slightly. SMM oxygen-blown #553 silicon in east China was at 9,200-9,300 yuan/mt, and #441 silicon was at 9,400-9,600 yuan/mt. Futures prices were supported by the macro front and capital sentiment, fluctuating upward WoW, with increased order placements and shipments from silicon enterprises in the north. Silicon metal supply and demand remained weak, while macro sentiment was strong. Influenced by robust capital sentiment in non-ferrous metals and other sectors, silicon metal futures prices found support. However, upward price movement was capped by hedging pressure and demand constraints, leading silicon metal prices to consolidate narrowly within a range.

Overseas market: Current overseas ADC12 offers rose by $40/mt to $2,900–2,950/mt, with the overall increase weaker than in the domestic market. The immediate import profit expanded to around 600 yuan/mt.

Summary: On Thursday, aluminum prices surged significantly. The A00 aluminum price jumped 600 yuan/mt WoW to 24,860 yuan/mt, while the SMM ADC12 price was raised by 400 yuan/mt to 24,550 yuan/mt. Aluminum scrap price increases were limited, but driven by significantly heated market sentiment, finished product offers were actively raised, and industry profitability continued to improve. However, as prices continued to climb, the "price without market" characteristic intensified further, with both market inquiries and transactions cooling noticeably. Pre-holiday stockpiling sentiment was significantly dampened, and some die-casting enterprises have planned early shutdowns for the holiday. Demand is expected to continue weakening. Overall, short-term secondary aluminum prices are being passively lifted by macro sentiment and capital flows, but spot transaction capacity to absorb high prices is insufficient. Looking ahead, as the Chinese New Year holiday approaches, downstream demand will further contract, with limited fundamental support for prices. However, high aluminum scrap costs coupled with phased supply tightening will continue to restrict downside room. Secondary aluminum alloy prices are expected to hover at highs in the short term, but caution is warranted as the contradiction between rapid price surges and weak fundamentals may trigger phased corrections once macro sentiment recedes.

[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.]