High Aluminum Prices Suppress Stockpiling Demand for the Chinese New Year, Extended Holiday Periods for Alloys and Downstream Die-Casting [SMM Cast Aluminum Alloy Morning Comment]

February 6 SMM Cast Aluminum Alloy Morning Comment

Futures: The aluminum alloy 2603 contract closed at 22,150 yuan/mt, up 235 yuan or 1.07% from the previous trading day. Volume was 2,539 lots, and open interest stood at 4,211 lots (down 150 lots from the previous session). After pulling back from the previous high of 24,410 yuan/mt, prices found support near 21,680 yuan/mt and rebounded slightly, overall remaining in the doldrums. The K-value was 25.40, the D-value 23.63, and the J-value 28.93; all three lines are within the 20-30 range, at low levels and showing signs of turning upward, indicating potential for a technical rebound after short-term overselling.

Spot-Futures Price Spread Daily Report: According to SMM data, on February 5, the SMM ADC12 spot price was at a theoretical premium of 1,385 yuan/mt to the most-traded cast aluminum alloy contract (AD2603) closing price at 10:15.

Warrant Daily Report: SHFE data showed that on February 5, the total registered volume of cast aluminum alloy warrants was 66,546 mt, a decrease of 245 mt from the previous trading day. By region: Shanghai's total registered volume was 5,388 mt, up 447 mt; Guangdong's total was 23,552 mt, down 90 mt; Jiangsu's total was 9,496 mt, down 421 mt; Zhejiang's total was 21,833 mt, down 151 mt; Chongqing's total was 5,586 mt, down 30 mt; Sichuan's total was 691 mt, unchanged.

Aluminum Scrap: Yesterday, spot primary aluminum prices pulled back from the previous session, with SMM A00 spot closing at 23,340 yuan/mt. Aluminum scrap market prices generally followed the decline today. Baled UBC was quoted at 16,850-17,300 yuan/mt (ex-tax), while shredded aluminum tense scrap (priced based on aluminum content) was quoted at 18,900-19,600 yuan/mt (ex-tax). On February 5, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,560 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,646 yuan/mt. The aluminum scrap market is expected to hover at highs next week, with shredded aluminum tense scrap (priced based on aluminum content) mainly trading in the range of 19,000-19,800 yuan/mt (ex-tax). Close attention should be paid to the shutdown and resumption of downstream processing enterprises and the progress of environmental protection enforcement in various regions, while remaining vigilant against a continued sluggish trading atmosphere in the aluminum scrap market if aluminum prices pull back again.

Silicon Metal: On February 5, SMM non-oxygen blown #553 in east China was at 9,100-9,300 yuan/mt; oxygen-blown #553 at 9,300-9,400 yuan/mt; #521 at 9,400-9,500 yuan/mt; #441 at 9,400-9,600 yuan/mt; #421 at 9,500-9,800 yuan/mt; #421 for silicone use at 9,800-10,200 yuan/mt; and #3303 at 10,200-10,500 yuan/mt. Prices in Huangpu Port, Tianjin, Northwest China, Kunming, Shanghai, Xinjiang, and Sichuan held steady.

Overseas market: Overseas ADC12 offers continued to hold steady at $2,840–2,900/mt, while domestic spot prices pulled back to 23,700 yuan/mt. Due to firm overseas prices, the import advantage narrowed significantly, and the immediate import profit/loss turned to a slight loss.

Summary: In the spot market, the A00 aluminum price dropped by 420 yuan/mt from the previous trading day to 23,340 yuan/mt, and the SMM ADC12 price was lowered by 200 yuan/mt to 23,600 yuan/mt. As futures weakened again, secondary aluminum market offers generally followed the decline, with most enterprises cutting prices by about 200 yuan/mt. Driven by the price pullback, downstream consumers mainly restocked on dips, leading to a slight improvement in transactions. Supply side, as the Chinese New Year approaches, secondary aluminum plants have successively clarified their production plans for the holiday. Most enterprises will suspend production between February 5 and 13, with resumption times concentrated after the eighth day of the first lunar month or after the Lantern Festival. The expected furnace shutdown period is 8–20 days, with the average shutdown duration extending by about 2 days YoY, mainly due to intensified aluminum price fluctuations, widespread downstream production cuts, and ongoing constraints from tightening policies and environmental protection-related controls. Overall, downstream demand continues to contract, and fundamental support for prices is marginally weakening. In the short term, secondary aluminum alloy prices are expected to hover at highs, with the price center likely to drop back slightly.

[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 constituting decision-making advice.]