Aluminium prices hit new highs in recent years, and downstream production cuts intention emerges

Futures: The aluminium alloy 2603 contract opened at RMB 24,280 per tonne, hit a high of RMB 24,750 per tonne, a low of RMB 24,210 per tonne, and closed at RMB 24,695 per tonne, with a single-day gain of 1.48per cent and an intraday fluctuation range of 2.58per cent (620 points), showing a strong breakout and upward trend, with the price hitting a recent new high. Trading volume was 327,300 lots, an increase of 47,418 lots from the previous value; open interest was 253,400 lots, a slight increase of 392 lots. The amplified volume and energy, coupled with the price increase, indicate that bulls actively entered the market to push prices higher, with buying power dominating. Resistance above is noted at RMB 24,750 per tonne; a break above could target higher levels. Support below is first seen at RMB 24,500 per tonne, followed by RMB 24,200 per tonne.

Basis report: According to SMM data, on January 6, the SMM ADC12 spot price showed a theoretical premium of RMB 590 per tonne to the closing price of the most-traded cast aluminium alloy contract (AD2603) at 10:15.

Warrant report: SHFE data showed that on January 6, the total registered volume of cast aluminium alloy warrants was 69,198 tonnes, a decrease of 422 tonnes from the previous trading day. The total registered volume in Shanghai was 4,757  tonne, unchanged from the previous trading day; in Guangdong, it was 22,238  tonne, a decrease of 30  tonne; in Jiangsu, it was 12,082  tonne, a decrease of 119  tonne; in Zhejiang, it was 23,782  tonne, a decrease of 273  tonne; in Chongqing, it was 5,919  tonne, unchanged from the previous trading day; in Sichuan, it was 420  tonne, unchanged from the previous trading day.

Aluminium scrap: On Tuesday, the spot price of primary aluminium rose significantly compared to the previous trading day, with SMM A00 spot aluminium closing at RMB 23,910 per tonne. The aluminium scrap market followed the rise in primary aluminium prices. Baled UBC was quoted centrally at RMB 17,500-18,000 per tonne (tax excluded), and shredded aluminium tensile scrap, priced based on aluminium content, was quoted centrally at RMB 19,300-19,800 per tonne (tax excluded). Directly affected by the surge in primary aluminium, prices in Shanghai, Zhejiang, Jiangsu, Tianjin, Shandong, and Jiangxi increased by RMB 400-600 per tonne today, while prices in Guizhou, Henan, and Hubei increased by RMB 300-400 per tonne today. Domestic aluminium scrap prices were expected to fluctuate at highs following primary aluminium this week, while remaining cautious of the risk of a pullback from highs. On the supply side, the issue of tax burden shifting further affected the market supply structure.

Silicon metal: On January 6, the silicon metal market was stagnant and consolidating. Yesterday, futures moved sideways and then strengthened. SMM oxygen-blown #553 silicon in East China was at RMB 9,200-9,300 per tonne, and #441 silicon was at RMB 9,300-9,500 per tonne. On the futures side, the most-traded silicon contract closed at RMB 8,900 per tonne yesterday, up 170 per tonne from the previous day, mainly driven by factors such as fund sentiment. Downstream silicone enterprises held another meeting to hold prices firm this Friday, drawing attention to its potential impact on the silicon metal market.

Overseas market: Current overseas ADC12 offers continued to rise to the range of $2,820–2,850 per tonne, with a slightly smaller increase compared to the domestic market, leading to a renewed expansion of the real-time import profit margin to around RMB 300 per tonne.

Summary: On Tuesday, aluminium prices once again hit new highs in recent years, with the SMM A00 aluminium price surging another RMB 600 per tonne in a single day to RMB 23,910 per tonne, bringing the cumulative increase over the past two days to RMB 1,450. This has driven the cost of recycled aluminium raw materials to continue climbing, with the SMM ADC12 price following suit and rising from RMB 400 per tonne to RMB 23,500 per tonne. However, in the face of the sharp jump in raw material prices, downstream demand remains weak. Die-casting enterprises, squeezed by both reduced orders and high-priced raw materials, are purchasing cautiously with strong risk aversion sentiment. Inquiries are frequent, but actual market transactions are scarce.

Some downstream players, unable to pass on the sudden cost increases further down the chain, are considering production cuts or even halting operations to alleviate operational pressure. Overall, the current secondary aluminium market is influenced by a mix of bullish and bearish factors: cost-driven support and tight supply underpin prices, while weak downstream demand and market fear of high prices exert downward pressure. Nevertheless, the continued release of macro tailwinds in the short term is expected to provide a boost to the market, with ADC12 prices likely to continue fluctuating at highs.

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.