Overnight cast aluminum closed lower; peak-season demand release remains mild [SMM Cast Aluminum Alloy Morning Comment]

10.9 SMM cast aluminum alloy morning comment

Futures: Overnight, the most-traded aluminum alloy 2612 contract opened at 23,170 yuan/mt, shot up to an intraday high of 23,175 yuan/mt before weakening persistently, dipped to a low of 23,000 yuan/mt, and closed at 23,000 yuan/mt, down 230 yuan/mt or 0.99%. Trading volume was 4,003 lots, and open interest increased by 1,186 lots. The decline came with rising open interest, and the daily candle closed as a bearish candlestick.

Spot-futures price spread daily: According to SMM data, on October 8, the theoretical premium of SMM ADC12 spot price over the 10:15 closing price of the most-traded cast aluminum alloy contract (AD2612) was 885 yuan/mt.

Warrant daily: SHFE data showed that on October 8, total registered warrants for cast aluminum alloy stood at 18,997 mt, down 393 mt from the previous trading day.

Aluminum scrap: Yesterday, SMM A00 aluminum price closed at 23,760 yuan/mt, down 270 yuan/mt from the previous trading day. The aluminum scrap market broadly followed the decline, with prices lowered by 100-200 yuan/mt. In terms of price spreads, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,492 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 1,326 yuan/mt. Supply side, aluminum scrap yards have all resumed operations after the holiday, and scrap release has increased somewhat. However, recycling policies still constrain liquidity, and the tight invoice supply pattern is unlikely to ease in the short term. Tight supply will continue to underpin prices. Demand side, as the traditional peak consumption season for cast aluminum alloy gradually kicks off, enterprises are accelerating order-taking and procurement. Under the dual-tight supply-demand pattern, price support for aluminum tense scrap is expected to strengthen further. Demand for wrought aluminum alloy is moderate, and in-factory inventory is relatively ample. However, with tax audits limiting supply, aluminum scrap supply is expected to decline, and the upward price channel will gradually open. That said, the release of peak-season demand remains relatively mild for now, and actual post-holiday order fulfillment still needs close monitoring.

Inventory: SMM statistics showed that this week, social inventory of cast aluminum alloy stood at 31,000 mt, edging down 300 mt from September 30. Post-holiday warehouse withdrawals dominated, and total inventory changed little compared with pre-holiday levels.

Silicon metal: On October 8, SMM prices in east China were stable for non-oxygen blown #553, oxygen-blown #553, #521, #441, #421, #421 for silicone use, and #3303. Silicon prices in south China, Guangdong, Kunming, Huangpu Port, Tianjin, northwest China, Xinjiang, Sichuan, and Shanghai were also stable.

Markets outside China: On the import side, overseas ADC12 offers edged down to $3,060-3,160/mt. Import parity remained near the breakeven line, and future attention should be paid to the replenishment of imported cargoes.

Summary: Yesterday, overall quotes in the ADC12 market were weak. SMM ADC12 price fell 100 yuan/mt from the last trading day before the holiday to 24,400 yuan/mt. The price weakness was mainly driven by the post-holiday pullback in aluminum prices and futures, as well as rising market sentiment to follow the decline. Some enterprises chose to adjust quotes in line with market conditions. However, the decline in aluminum scrap raw material prices was relatively limited. Against the backdrop of tight compliant raw material supply, the cost side still provided some support to spot prices, so some enterprises kept their quotes unchanged for the time being. Demand side, downstream procurement largely resumed after the holiday, but overall performance was relatively steady, and improvement in market transactions was limited. In summary, ADC12 prices are expected to continue moving sideways in the short term. Futures and aluminum price trends will cause some disturbance to market sentiment, but cost support will still limit further downside. Attention should be paid to the recovery of downstream demand after the holiday and changes in aluminum scrap raw material prices.

[Data source statement: Except for public 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.]