Futures bulls' momentum recovers, aluminum scrap supply disruptions intensify [SMM Cast Aluminum Alloy Morning Comment]

9.18 SMM cast aluminum alloy morning comment

Futures: Overnight, the most-traded AD2611 aluminum alloy contract opened at 23,550 yuan/mt in the night session, quickly shot up to 23,825 yuan/mt after the open, then pulled back slightly to a low of 23,505, overall consolidating at highs, and closed at 23,770 yuan/mt in the night session, up 1.21%. On the 4-hour chart, a large bullish candlestick formed, with a rebound starting from the previous low of 23,145. The DKX indicator turned upward, the KD indicator formed a bullish crossover at lows and rebounded, and open interest increased simultaneously. Short-term bullish repair momentum was released, and the market shifted from earlier consolidation at lows to a rebound-led stronger pattern.

Basis daily: According to SMM data, on September 7, the theoretical premium of SMM ADC12 spot prices over the closing price of the most-traded cast aluminum alloy contract (AD2611) at 10:15 was 905 yuan/mt.

Warrant daily: SHFE data showed that on September 17, total registered warrants for cast aluminum alloy stood at 22,755 mt, down 1,021 mt from the previous trading day.

Social inventory: On September 17, SMM data showed China's cast aluminum alloy social inventory at 34,600 mt, up 500 mt WoW, marking the sixth consecutive week of inventory buildup since early August, though the pace of accumulation slowed. By region, inventory changes diverged significantly this week. Inventory in Jiangsu increased by 1,500 mt, while the other five regions combined decreased by 1,200 mt, with Guangdong destocking by 800 mt.

Aluminum scrap: This week, domestic aluminum scrap market prices followed the decline before partially rebounding, with the center pulled back along with primary aluminum. As of September 17, SMM A00 aluminum prices closed at 24,180 yuan/mt, down 380 yuan/mt from 24,560 yuan/mt last Thursday, while domestic aluminum scrap raw material prices followed the decline to a relatively limited extent. In terms of price spreads, on September 17, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,468 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,247 yuan/mt. The price spread for aluminum tense scrap narrowed again WoW. Supply side, the tight raw material supply situation remained unchanged, and the scarcity of compliant, invoiced aluminum scrap continued to rise. Notably, tax audits in central China continued to escalate, and the sharp drop in regional aluminum scrap supply will significantly disrupt aluminum scrap circulation. Demand side, the cast aluminum alloy "September peak season" fell short of expectations, with demand yet to see a substantial release. End-use orders improved only slightly from the off-season, without concentrated restocking. Demand for wrought aluminum alloy was moderate, and in-factory aluminum scrap inventory was relatively ample.

Silicon metal: Yesterday, SMM oxygen-blown #553 silicon in east China was at 9,300-9,400 yuan/mt. At the start of the week, expectations for Q4 polysilicon production cuts, combined with production resumptions at some silicon enterprises in the northwest, led bearish market sentiment to dominate silicon metal prices, which remained in the doldrums. Although silicon metal fundamentals in September still showed a MoM supply reduction and slight inventory destocking, growing concerns over downstream demand kept prices under pressure. As the most-traded silicon metal contract fell to around 8,400-8,500 yuan/mt, cost support below futures prices and stronger buying demand increased, and prices may shift to consolidation. Future trends will depend on whether polysilicon production cut expectations materialize, changes in operating rates at enterprises in the south and north, and capital sentiment.

Markets outside China: Imported ADC12 offers edged up to $3,100-3,200/mt, but the increase was weaker than in the domestic market. Combined with a stronger yuan exchange rate, import break-even approached the break-even line. Attention should be paid to the replenishment of imported supply.

Summary: On Thursday, the ADC12 market overall showed widespread price increases and stronger cost support. SMM ADC12 prices rose 100 yuan/mt from the previous trading day to 24,350 yuan/mt. Cost side, aluminum scrap raw material procurement remained difficult, and prices stayed high. Coupled with increasingly strict invoice supervision, reverse invoicing operations were suspended in some regions, further increasing enterprises' reliance on compliant, invoiced supply. However, related supply was limited and procurement prices were high, leading to persistently rising overall raw material cost pressure. Currently, the upward momentum in ADC12 market prices is mainly driven by higher compliant raw material costs, and enterprises' willingness to raise offers has clearly strengthened. However, the actual improvement in end-use demand remains to be seen. The sustainability and extent of future price increases will still depend on the strength of cost support, the implementation of invoice policies, and downstream purchasing capacity.

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