Aluminum alloy sentiment recovers in the short term, prices consolidate and repair [SMM cast aluminum alloy morning comment]

10.19 SMM Cast Aluminum Alloy Morning Comment

Futures: Last Friday night, the most-traded cast aluminum alloy 2612 contract opened at 22,875 yuan/mt, dipped to an intraday low of 22,775 yuan/mt, shot up to 22,945 yuan/mt, and closed at 22,865 yuan/mt, up 70 yuan/mt or 0.31%. Trading volume for the day was 3,329 lots, down 7,805 lots from the previous day, and open interest was 21,053 lots, down 47 lots, showing a pattern of a slight rebound on shrinking volume. The daily candlestick closed as a small bullish candle, with the previous low of 22,520 yuan/mt forming support. The DKX indicator's B line is below the D line, with KD values of K at 22.08 and D at 27.87, and the K line below the D line, indicating the indicator remains weak. In the short term, this is a low-level recovery after a decline.

Basis Daily: According to SMM data, on October 16, the theoretical basis of SMM ADC12 spot price against the most-traded cast aluminum alloy contract (AD2612) at the 10:15 closing price was 1,620 yuan/mt.

Warrant Daily: SHFE data shows that on October 15, total registered warrants for cast aluminum alloy stood at 14,361 mt, down 62 mt from the previous trading day.

Aluminum Scrap: Last Friday, SMM A00 aluminum price closed at 23,460 yuan/mt, up 200 yuan/mt WoW from the previous trading day. Price difference between A00 aluminum and aluminum scrap: On October 16, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was about 2,214 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was about 715 yuan/mt. Supply side, tax audits in central China continue to deepen, making compliant invoiced aluminum scrap increasingly scarce, and enterprises holding invoices are strongly inclined to hold prices firm. Competition among enterprises is intense, with some only able to issue 20% of their quota, keeping effective supply persistently tight. In the short term, the aluminum scrap market is expected to hold up well, with limited downside. Supply side, the scope and intensity of tax audits remain the core variable, and the tight supply of compliant invoiced cargo is unlikely to ease. Demand side, downstream scrap utilization enterprises are operating at moderate rates during the current peak season, and with both supply and demand tight, price support is expected to strengthen further. In addition, the price difference between A00 aluminum and aluminum scrap has narrowed again to a historical low, weakening the cost advantage of aluminum scrap, and the issue of primary aluminum substitution is back on the table. Going forward, focus on the spread of tax audits, changes in invoicing quotas across regions, and downstream operating pace.

Silicon Metal: On October 16, 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 Guangdong, Huangpu Port, Tianjin, Shanghai, Kunming, northwest China, Sichuan, south China, and Xinjiang were stable.

Markets Outside China: On the import side, overseas ADC12 offers slipped to $3,050-3,130/mt, with import break-even still near the break-even line.

Summary: Last Friday, ADC12 market quotes were generally raised by 100 yuan/mt. Driven by the rebound in aluminum prices and futures, market sentiment recovered somewhat, and some enterprises raised their quotes accordingly, showing clear signs of recovery after the earlier price pullback. However, downstream demand improvement remains insufficient, with purchases mainly need-based and limited acceptance of higher prices. Whether market transactions can follow through remains to be seen. Overall, short-term market sentiment has recovered somewhat, but demand-side support is relatively limited. The upside for prices is expected to depend on further assessment of raw material cost changes and actual transaction conditions.

[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.]