Tight aluminium scrap supply pushes up prices, downstream consumption sees mild recovery

9.1 SMM cast aluminium alloy morning comment

Futures: The most-traded cast aluminium alloy AD2511 contract opened at RMB 20,325 per tonne overnight, with the highest at RMB 20,380 per tonne and the lowest at RMB 20,325 per tonne, and finally closed at RMB 20,340 per tonne, up RMB 35 per tonne or 0.17 per cent from the previous close. The trading volume was 662 lots, and the open interest stood at 7,914 lots, mainly driven by long position increases.

Spot-Futures Price Spread Report: According to SMM data, on September 9, the spot price of SMM ADC12 showed a theoretical premium of RMB 510 per tonne against the closing price of the most-traded cast aluminium alloy contract (AD2511) at 10:15 am.

Aluminium scrap: On Tuesday, spot primary aluminium prices rose from the previous trading day, with SMM A00 spot aluminium closing at RMB 20,770 per tonne, and aluminium scrap prices followed the upward trend. As the traditional peak season begins, orders at some downstream scrap utilisation enterprises recovered. However, tight supply remains the dominant theme in the aluminium scrap market, keeping procurement prices high. Baled UBC rose RMB 50 per tonne w-o-w, while shredded aluminium tensile scrap (priced based on aluminium content), scrap wheel hub, and mechanical casting aluminium scrap increased RMB 100 per tonne from the previous trading day. Following last week's significant adjustments in aluminium tensile scrap recycling prices in Jiangxi, Hunan also raised quotations over the past two days, with a cumulative increase of RMB 400 per tonne. Recent substantial price adjustments in some regions stem from unconfirmed policy implementation, exacerbating supply shortages and forcing some scrap utilisation enterprises to raise raw material recycling prices to maintain production. The market should closely monitor the progress of tax policy implementation and the actual recovery of consumption during the September peak season, as price trends will depend on the interplay between cost transmission and supply tightness.

Silicon metal: Trading activity in the silicon metal spot market remained sluggish. Oxygen-blown #553 silicon in east China was quoted at RMB 9,000-9,200 per tonne yesterday, while #441 silicon traded at RMB 9,300-9,500 per tonne. Some traders' high offers were difficult to transact. In the futures market, prices fluctuated significantly during the day. The most-traded contract first surged then plunged sharply after 2 pm, reaching an intraday high of RMB 8,620 per tonne and a low of RMB 8,385 per tonne, finally closing at RMB 8,410 per tonne, down RMB 120 per tonne from the previous day.

Overseas market: Current overseas ADC12 offers are in the range of  USD 2,500-2,530 per tonne, with import premiums hovering around RMB 300 per tonne. Local ADC12 ex-VAT quotations in Thailand temporarily stand at 83-84 baht per kg.

Inventory: According to SMM statistics, the daily social inventory of secondary aluminium alloy ingots in Foshan, Ningbo, and Wuxi totalled 34,881 tonnes on September 10, up 5 tonnes from the previous trading day and 954 tonnes from last Wednesday (September 3).

Summary: Aluminium prices rebounded for three consecutive days, driving rapid follow-up increases in aluminium scrap prices, with the market rising by RMB 100 per tonne. Driven by cost increases, secondary aluminium producers generally raised their offers by RMB 100 per tonne, with a strong willingness to adjust prices in the market. Since entering September, downstream consumption has shown a mild recovery trend, with demand continuously improving, though the characteristics of the traditional peak season have not yet fully emerged. In the short term, ADC12 prices are expected to hover at highs supported by costs, but limited by the moderate pace of demand recovery and factors such as increasing social inventory; further upside room for prices may be constrained. The market needs to closely monitor the supply situation of raw materials, the pace of demand recovery, and the impacts of policy changes going forward.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.