Spot Primary Aluminum Prices Decline for Three Consecutive Days, Marginal Improvement in Market Demand [SMM Cast Aluminum Alloy Morning Comment]

February 4 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2603 contract closed at 22,300 yuan/mt, up 85 yuan or 0.38% from the previous trading day, indicating signs of short-term stabilization. The K-value was 20.35, the D-value 24.93, and the J-value 11.2, all within the 20-50 range. The J-line has turned upward from a low level, suggesting rebound momentum after short-term overselling, but it has not yet entered the strong zone. During the current session, the trading volume was 4,427 lots, and open interest was 4,713 lots, down 110 lots from the previous trading day, indicating a convergence of divergence between longs and shorts at the current price level.

Basis Daily Report: According to SMM data, on February 3, the SMM ADC12 spot price showed a theoretical premium of 1,490 yuan/mt over the closing price of the cast aluminum alloy most-traded contract (AD2603) at 10:15.

Warrant Daily Report: SHFE data showed that on February 3, the total registered warrant volume for cast aluminum alloy was 66,913 mt, down 812 mt from the previous trading day. The total registered volume in Shanghai was 4,971 mt, down 59 mt; in Guangdong, 23,283 mt, down 182 mt; in Jiangsu, 10,007 mt, down 239 mt; in Zhejiang, 22,195 mt, down 209 mt; in Chongqing, 5,766 mt, down 123 mt; and in Sichuan, 691 mt, unchanged from the previous trading day.

Aluminum Scrap: Yesterday, the spot price of primary aluminum continued to decline from the previous trading day, with SMM A00 spot aluminum closing at 23,290 yuan/mt. Aluminum scrap market prices followed the decline overall today. Baled UBC was quoted in the range of 16,700-17,100 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted in the range of 18,900-19,600 yuan/mt (ex-tax). On February 3, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,530 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,616 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 19,100-20,000 yuan/mt (ex-tax). Before the Chinese New Year, it is necessary to closely track the trend of primary aluminum, the progress of lifting environmental protection alerts in central China, and pre-holiday production halts and holidays. Be cautious of a pullback in aluminum scrap driven by aluminum prices retreating after a rapid rise, and market trading atmosphere is expected to remain sluggish.

Silicon Metal: Yesterday, SMM oxygen-blown #553 silicon in east China was quoted at 9,300-9,400 yuan/mt, and #441 silicon at 9,400-9,600 yuan/mt, flat from the previous day. Futures prices moved sideways near 8,800-8,900 yuan/mt. Downstream users and traders generally had bid expectations below the futures price, and market trading was sluggish.

Overseas Market: Overseas ADC12 quotes held steady at $2,840-2,900/mt, while domestic spot prices fell to around 22,700 yuan/mt, narrowing the immediate import profit to within 100 yuan.

Summary: In the spot market, the price of A00 aluminum fell by 410 yuan/mt to 23,290 yuan/mt compared to the previous trading day, while the SMM ADC12 price dropped by 200 yuan/mt to 23,650 yuan/mt. Futures continued their downward trend, and quotations in the secondary aluminum market generally followed suit, though the extent of price declines varied among manufacturers. Demand side, purchasing sentiment improved slightly compared to earlier periods, but downstream buyers remained cautious amid expectations of further price declines. Coupled with increased short-term market volatility, pre-holiday stockpiling willingness remained low. Supply side, as the Chinese New Year approaches, some secondary aluminum plants have arranged early holidays due to factors such as reduced orders and environmental protection-related controls. Production is expected to halt gradually starting from the 5th, with the overall holiday duration extended compared to the same period in previous years. Overall, persistently weak downstream demand and declining raw material costs have weakened fundamental support for prices. In the short term, secondary aluminum alloy prices are expected to remain in the doldrums.

[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, and are for reference only, not constituting decision-making advice.]