Bulls Lost Momentum at High Levels; Focus on Lower Support for Aluminum Alloy Futures Prices [SMM Cast Aluminum Alloy Morning Comment]

3.16 SMM Morning Comment on Cast Aluminum Alloy

Futures: In last Friday’s night session, the cast aluminum alloy ad2604 contract opened higher and then pulled back, remaining in the doldrums. It opened at 23,655 yuan/mt, hit a high of 23,810 yuan/mt and a low of 23,605 yuan/mt, and closed at 23,635 yuan/mt, down 20 yuan/mt or 0.08% from the previous day. On the intraday chart, the price rose sharply after the open and then weakened wave by wave, overall maintaining narrow consolidation at low levels, with no obvious rebound near the close. Trading volume was 2,740 lots, and open interest fell by 146 lots to 5,533 lots.

Spot-Futures Price Spread Daily: According to SMM data, on March 13, the theoretical spot premium of the SMM ADC12 spot price over the 10:15 closing price of the most-traded cast aluminum alloy contract (AD2604) narrowed to 920 yuan/mt.

Warrant Daily: SHFE data showed that on March 13, the total registered volume of cast aluminum alloy warrants was 54,311 mt, down 1,049 mt from the previous trading day. Among them, the total registered volume in Shanghai was 4,780 mt, down 150 mt from the previous trading day; Guangdong 19,153 mt, down 89 mt; Jiangsu 6,567 mt, down 180 mt; Zhejiang 18,000 mt, down 540 mt; Chongqing 4,144 mt, unchanged; and Sichuan 1,658 mt, down 90 mt.

Aluminum scrap: Continued fluctuations in geopolitical risks drove spot primary aluminum down 140 yuan/mt from the previous trading day last Friday, and the aluminum scrap market fell across the board. In terms of the price difference between A00 aluminum and aluminum scrap, as of March 13, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,560 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,646 yuan/mt. Although it is now the traditional peak season, affected by end-user order recovery falling short of expectations and wild swings in prices, the production pace of China’s aluminum scrap yards and downstream scrap utilization enterprises remained lukewarm, and actual raw material restocking fell short of expectations. On the policy side, recycled enterprises lacked clear expectations for the specific implementation rules of “reverse invoicing,” and the circulation of aluminum scrap will tighten further. The aluminum scrap market is expected to hold up well at high levels this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) running around 20,600-21,400 yuan/mt ex-tax. Primary aluminum will still be the key driver under the influence of the geopolitical situation, and the risk of price fluctuations is intensifying. Supply side, cargoes are being released steadily, but policy uncertainty continues to weigh on circulation efficiency. Demand side, the pace of peak-season recovery is relatively slow, and high prices plus wild swings continue to suppress purchase willingness. In the short term, close attention is needed on primary aluminum trends amid developments in geopolitical conflicts, recovery in downstream orders, and the implementation of recycling policies, while guarding against the risk of a sharp pullback from high levels.

Silicon metal: (1) Price: Last week, spot silicon metal transactions were stagnant. SMM east China oxygen-blown #553 silicon was at 9,100-9,300 yuan/mt, 441# silicon at 9,300-9,600 yuan/mt, and the most-traded silicon metal futures contract fluctuated around 8,600-8,800 yuan/mt. The price center edged up slightly from the previous period. Most downstream players digested inventories or purchased as needed, with sentiment relatively strong but inquiries and procurement sluggish, and silicon metal prices mainly fluctuated. (2) Production: In early March, some capacity on the supply side resumed production. With production release, silicon metal production increased compared with the beginning of the month.

Markets outside China: Overseas ADC12 quotations have now risen to around $3,400/mt, while prices in China have lagged behind. Immediate import losses continued to widen to nearly 2,000 yuan, and the import window remained closed.

Summary: Last Friday, quotations in the secondary aluminum alloy market were mainly stable. Before noon, fluctuations in futures narrowed, and enterprises' willingness to adjust prices weakened significantly, with most producers choosing to hold prices steady and wait. In the afternoon, as futures fluctuated downward, some producers began to cut quotations by 100 yuan/mt. Demand side, downstream buyers still mainly made just-in-time procurement, but against the backdrop of pullbacks in aluminum prices and the approaching weekend, some enterprises became slightly more active in procurement, and market transactions improved somewhat from the previous day. In the short term, raw material costs remain high, providing strong support for ADC12 prices; however, if prices continue to rise, the suppressing effect of high prices on demand will become increasingly evident. At the same time, as the operating rate gradually recovers, the supply side is also expected to see a mild increase. ADC12 prices are expected to hover at highs in the short term. Going forward, focus is advised on the pace of downstream order release, the pressure on the market from the supply recovery process, and the impact of the Middle East situation on aluminum prices.
 

[Data Source Statement: Except for public information, all other data is derived by SMM based on public information, market communication, and SMM's internal database models, and is for reference only and does not constitute decision-making advice.]