Rising Costs Support Price Hikes, Off-Season Demand Caps Gains [SMM Cast Aluminum Alloy Morning Comment]

Jul 15 SMM Cast Aluminum Alloy Morning Comment

Futures: Overnight, the most-traded AD2609 contract closed at 22,945 yuan/mt, down 85 points or 0.37% intraday. Trading volume was 1,985 lots, down 6,774 DoD, while open interest was 19,385 lots, up 16 DoD, showing a slight increase. The 5-, 10-, and 20-day moving averages are aligned bullishly in the short term, and prices are holding above all short-term moving averages. The medium-term trend is biased toward drifting higher. The 60-period moving average sits above current prices, acting as medium-term resistance. The closing price is clinging to the 5-day moving average, indicating relatively strong short-term support.

Spot-Futures Price Spread Daily: According to SMM data, on July 14, the SMM ADC12 spot price was at a theoretical premium of 1,115 yuan/mt over the 10:15 a.m. closing price of the most-traded cast aluminum alloy contract (AD2609).

Warrant Daily: SHFE data shows that on July 14, total registered cast aluminum alloy warrants stood at 21,710 mt, up 187 mt from the previous trading day. By region, Shanghai: 2,373 mt, up 277 mt; Guangdong: 2,634 mt, down 151 mt; Jiangsu: 4,589 mt, up 182 mt; Zhejiang: 7,121 mt, down 91 mt; Chongqing: 4,208 mt, down 30 mt; Sichuan: 785 mt, unchanged.

Aluminum Scrap: Yesterday, SMM A00 spot aluminum closed at 23,270 yuan/mt, up 270 yuan/mt from the previous trading day, and the scrap market largely followed with gains of 150–200 yuan/mt. This week, the scrap market is expected to remain locked in a narrow sideways pattern with demand pressure from above and a cost-funded floor from below. Shredded aluminum tense scrap (priced based on aluminum content) is likely to trade mainly around 19,900–20,500 yuan/mt. The pullback in spot primary aluminum prices limited the extent of further narrowing in the price difference between A00 aluminum and scrap, so the cost advantage of scrap versus primary aluminum is unlikely to disappear in the near term, and demand-side support for scrap prices persists. If aluminum prices continue to decline, the substitution effect of primary aluminum for scrap will accelerate.

Silicon Metal: Yesterday, SMM oxygen-blown #553 silicon in east China was around 9,100–9,200 yuan/mt, and #441 silicon was around 9,200–9,300 yuan/mt. The most-traded futures contract consolidated within 8,450–8,500 yuan/mt. A strengthening spot-futures spread for silicon metal, combined with persistently high trucking freight rates, kept silicon metal prices in east China relatively firm. Futures prices have clear cost-based support at the bottom while being capped by the supply-demand relationship above, keeping silicon metal moving sideways in a narrow range.

Markets Outside China: On imports, overseas ADC12 offers remain in the $3,100–$3,200/mt range, and the price spread between Chinese and overseas markets continues to narrow. If overseas offers continue to pull back, the import profit window may gradually open, and increased imports would then supplement China’s relatively tight supply.

Summary: Yesterday, diverging willingness to adjust ADC12 prices emerged: rising costs prompted some enterprises to try to follow the uptick, while others chose to keep offers tentatively stable. As the traditional consumption off-season deepens, downstream orders and transactions remain persistently weak, creating some resistance to price increases. Given insufficient demand support, enterprises generally took a wait-and-see approach, focusing on stable-price selling. In the short term, ADC12 spot prices are expected to remain caught between cost support and demand pressure, mainly moving sideways.

[Data Source Statement: All data, except publicly available information, are derived from public data, market communication, and SMM’s internal database models, processed by SMM. They are for reference only and do not constitute investment advice.]