ADC12 Spot Steady on Cost Support, Warrant Destocking and Price Spread Between Chinese and Overseas Markets Continue to Narrow [SMM Cast Aluminum Alloy Morning Comment]

7.7 SMM Cast Aluminum Alloy Morning Comment

Futures: Overnight, the aluminum alloy 2609 contract opened at 22,870 yuan/mt, hitting a high of 22,900 yuan/mt, dipping to a low of 22,700 yuan/mt, and closing at 22,835 yuan/mt, edging down by 55 yuan/mt, or 0.24%, from the previous settlement price of 22,820 yuan/mt. Overnight trading volume stood at 2,037 lots, with open interest at 19,018 lots, down 119 lots from the previous session. Long and short forces were relatively balanced. After failing to hold highs under pressure overnight, prices closed slightly lower, yet remained above moving average support.

Spot-futures Price Spread Daily: According to SMM data, as of 10:15 AM on July 6, the theoretical premium of SMM ADC12 spot price over the most-traded cast aluminum alloy contract (AD2608) closing price was .

Warrant Daily: SHFE data showed that on July 6, total registered cast aluminum alloy warrants stood at 24,253 mt, down 1,232 mt from the previous trading day.

Aluminum Scrap Side: Yesterday, SMM A00 spot aluminum closed at 22,840 yuan/mt, up 80 yuan/mt from the previous trading day, while scrap aluminum market prices diverged markedly. Regarding price differences between A00 aluminum and scrap, on July 6, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 1,976 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 662 yuan/mt. Supply side, constraints from the reverse invoicing policy are hard to reverse in the short term, and the tightness of compliant tax-invoiced cargoes persists. On the import front, the lagged depressive effect of multiple bearish factors on actual port arrivals will gradually emerge in the coming months, and the supplement from imported aluminum scrap will weaken further. Demand side, as the off-season deepens, downstream operating rates stay low, end-use orders show little meaningful improvement, and scrap utilization enterprises will likely continue purchasing as needed and keep inventories low. The price difference between primary aluminum and scrap has narrowed to historically low levels, greatly eroding the economic advantage of scrap over primary aluminum. If aluminum prices keep declining, the substitution effect will accelerate.

Silicon Metal Side: On July 6, SMM non-oxygen blown #553 price in east China held steady; oxygen-blown #553 held steady; #521 held steady; #441 held steady; #421 held steady; #421 for silicone held steady; and #3303 held steady. Silicon prices in Kunming, Tianjin, Huangpu Port, Sichuan, the Northwest, Shanghai, South China, and Xinjiang also held steady.

Markets Outside China: Recently, ADC12 prices in markets outside China continued trending down, with current quotes further pulling back to the $3,080-3,190/mt range. Meanwhile, domestic ADC12 prices remained firm, driving a continued recovery in the price spread between Chinese and overseas markets, with the import loss narrowing further to approximately 1,140 yuan. If domestic prices stay high going forward while markets outside China continue to fall under pressure, the price inversion between Chinese and overseas markets is likely to narrow further, potentially opening the import profit window gradually.

Summary: On Monday, SMM ADC12 price held steady at 24,000 yuan/mt from the previous trading day. Boosted by the continued rebound in spot aluminum prices and aluminum alloy futures, some enterprises raised their quotes by 50-100 yuan/mt accordingly, strengthening cost support. However, downstream demand remained sluggish, transactions stayed thin, prompting some enterprises to keep prices stable and wait. Amid the interplay of high costs and weak demand, the overall market adopted cautious pricing, and ADC12 prices are expected to continue moving sideways in the short term, with further upside requiring the cooperation of end-use demand.

[Data source statement: Data other than public information are processed by SMM based on public information, market communication, and SMM's internal database models, for reference only and do not constitute decision-making advice.]