H1 auto production and sales fell YoY, ADC12 tug-of-war between sellers and buyers moved sideways [SMM cast aluminum alloy morning comment]

July 10 SMM Cast Aluminum Alloy Morning Comment

Futures: The overnight aluminum alloy 2609 contract opened at 23,020 yuan/mt, dipped to a session low of 22,910 yuan/mt, hit a high of 23,085 yuan/mt, and closed at 23,050 yuan/mt, up 80 yuan/mt, or 0.35%, from the settlement price. The intraday high-low spread was 155 yuan/mt. Night session trading volume totaled 2,847 lots, down 1,121 lots from the same period the previous trading day. Open interest stood at 19,075 lots, edging up 58 lots. The intraday move dipped initially before consolidating higher, then rallied at the close to end near the session high, holding above the volume-weighted average price throughout. The 4-hour candlestick closed bullish. The DKX indicator maintained a bullish alignment, and the RSI rose into the 75.44-86.22 range. The futures market displayed a bottoming-out pattern, with bulls in control.

Spot-Futures Price Spread Daily: According to SMM data, on July 9, SMM ADC12 spot price traded at a theoretical premium of over the closing price of the most-traded cast aluminum alloy futures contract (AD2609) at 10:15 am.

Warrant Daily: SHFE data showed that on July 9, total registered warrants for cast aluminum alloy stood at 22,485 mt, down 242 mt from the previous trading day.

Industry Updates: According to CAAM data, in June, automobile production and sales reached 2.76 million and 2.81 million units, up 5.5% and 6.9% MoM, but down 1.2% and 3.2% YoY, respectively. From January to June, automobile production and sales totaled 14.993 million and 15.017 million units, down 4% and 4.1% YoY, respectively. Market trends showed three major divergences: 1) Domestic demand was clearly under pressure, with sales falling by double digits; exports grew more than expected, providing steady support. 2) The passenger vehicle market performed poorly, with a slight decline; the commercial vehicle market continued to improve, with sales maintaining growth. 3) The industry's transition from old to new growth drivers continued, with the traditional internal combustion engine vehicle market shrinking further and NEVs maintaining stable growth.

Aluminum Scrap: SMM A00 spot aluminum price closed at 22,950 yuan/mt, edging down 90 yuan/mt from the previous trading day. The aluminum scrap market followed suit overall, with some regions holding steady amid a wait-and-see stance. In terms of price spreads, on July 9, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 2,011 yuan/mt, and that between A00 aluminum and shredded aluminum tense scrap stood at 697 yuan/mt. These spreads edged slightly higher from the historically low levels seen last week but remained extremely low. Tightening of the reverse invoicing policy provided a floor, and the logic that aluminum scrap is prone to rise but hard to fall remains intact. Next week, the aluminum scrap market is expected to continue moving sideways in a narrow range, pressured by weak demand but supported by costs, with the mainstream water-priced (priced based on aluminum content) shredded aluminum tense scrap hovering around 19,900-20,500 yuan/mt.

Silicon Metal: This week, silicon metal futures prices accelerated their decline before rebounding slightly. Open interest of the most-traded contract changed significantly, first increasing by 67,000 lots and then decreasing by 30,000 lots, intensifying the tug-of-war between longs and shorts and widening the fluctuation range. In terms of quotes and transactions, silicon enterprises generally held their offers stable, with strong sentiment to hold prices firm under loss-making pressure. Spot-futures traders saw decent sales and smooth shipments, and the spot-futures price spread strengthened by 50-100 yuan/mt. Downside room was limited by clear cost support; however, the loose supply-demand balance remained unchanged, and any uptrend lacked fundamental drivers.

Markets Outside China: Yesterday, overseas ADC12 prices remained steady in the range of $3,100-3,200/mt. As domestic prices edged lower, import losses widened slightly, with the current loss per metric ton estimated at around 1,182 yuan.

Summary: On Thursday, ADC12 market quotes were mostly stable, with slight downward adjustments in some areas, and the wait-and-see atmosphere intensified further. Yesterday, aluminum prices and cast aluminum alloy futures pulled back slightly. Some enterprises did not rush to follow the decline but waited for clearer market direction, indicating that if the market continues to weaken, they might make catch-up price cuts. Meanwhile, downstream orders have weakened since July, providing insufficient transaction support and exerting certain downward pressure on prices. Furthermore, the recent increase in imported ADC12 supply has eased the earlier expectation of tight domestic supply, also undermining confidence to hold prices firm. However, with aluminum scrap costs still showing some resilience, most enterprises still maintain a steady and wait-and-see stance at this stage. In the short term, ADC12 prices are likely to continue moving sideways in a narrow range.

[Data Source Disclaimer: All 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 any decision-making advice.]