Cast aluminium alloy fluctuates upward as policy disruptions intensify the tug-of-war between sellers and buyers in aluminium scrap

Futures: The most-traded AD2511 cast aluminium alloy futures contract opened at RMB 20,130 per tonne, hit a low of RMB 20,105 per tonne, and reached a high of RMB 20,240 per tonne overnight, closing at RMB 20,220 per tonne, up RMB 95 per tonne or 0.47 per cent from the previous close. Trading volume was 926 lots, with open interest at 8,014 lots, mainly driven by an increase in long positions.

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Spot-Futures Price Spread Daily Report: According to SMM data, on August 21, the theoretical premium of the SMM ADC12 spot price over the most-traded AD2511 futures contract (closing price at 10:15) widened to RMB 315 per tonne.

Aluminium scrap: On Thursday, the spot primary aluminium price increased by RMB 160 per tonne compared to the previous trading day, with SMM A00 spot closing at RMB 20,680 per tonne. Overall, the aluminium scrap market prices rose. Baled UBC increased by RMB 50 per tonne W-o-W, shredded aluminium tense scrap (priced based on aluminium content), car wheel hubs, and motorcycle wheel hubs increased by RMB 100 per tonne W-o-W. In Jiangxi and Anhui regions, the prices of raw aluminium scrap collectively increased by RMB 100 per tonne today, making it increasingly difficult to purchase aluminium scrap. Recently, multiple regions have initiated special clean-up work for irregular tax rebates, which has caused widespread shock in the secondary aluminium market.

Currently, the market is still in a transitional observation phase, awaiting the implementation of relevant policies. Afterwards, some downstream secondary aluminium producers in certain areas will face pressure due to rising tax costs. To offset these costs, enterprises may lower raw material procurement prices, increasing the pressure on domestic aluminium scrap prices. However, supply side, the short-term supply of aluminium scrap will remain tight, giving suppliers a certain degree of pricing power. Overall, SMM believes that subsequent aluminium scrap prices will operate under pressure, entering a stage of bargaining between sellers and buyers.

Silicon metal: (1) Prices: This week, the spot silicon metal prices fluctuated widely, with rapid changes in increases and decreases. Yesterday, SMM oxygen-blown #553 silicon in East China ranged from RMB 9,200 to RMB 9,300 per tonne, and #441 silicon ranged from RMB 9,500 to RMB 9,600 per tonne. On Wednesday, the silicon metal futures prices fell sharply, with the most-traded contract hitting a low below RMB 8,200 per tonne. Silicon suppliers' quotes followed the decline, with low-price transactions of oxygen-blown #553 silicon in East China ranging from RMB 8,800 to RMB 9,000 per tonne. On Thursday, the futures rebounded, closing at RMB 8,635 per tonne, leading to another increase in supplier quotes. Downstream users restocked at lower prices, but after the price increase, market inquiry activity decreased, resulting in fewer new orders.

(2) Production: Over the past week, the number of operating furnaces in Xinjiang and other regions increased, leading to a sustained increase in silicon metal production.

(3) Inventory: As of August 21, SMM statistics show that the total social inventory of silicon metal in major regions was 543,000 tonnes, down 2,000 tonnes W-o-W. Among this, the general social warehouse inventory was 117,000 tonnes, unchanged W-o-W, while the social delivery warehouse inventory (including unregistered warrants and spot parts) was 426,000 tonnes, down 2,000 tonnes W-o-W. [Excluding Inner Mongolia, Gansu, and other regions]

Overseas market: Current overseas ADC12 offers rose slightly to the range of USD 2,470-2,500 per tonne, as domestic prices increased and the RMB exchange rate rose, narrowing the immediate import losses slightly; local ADC12 offers in Thailand, excluding tax, rose slightly to 83-84 baht per kg.

Inventory: According to SMM statistics, as of August 21, the social inventory of secondary aluminium alloy ingots in mainstream domestic consumption areas was 35,144 mt, down 11 mt W-o-W.

Summary: Yesterday, aluminium prices rebounded sharply, and the SMM ADC12 price followed with an increase of RMB 100 per tonne to RMB 20,450 per tonne. Currently, aluminium scrap supply remains tight, with prices generally rising, pushing up the cost of raw materials and driving secondary aluminium alloy prices higher. Additionally, recent news of tax rebate cancellations in Anhui and Jiangxi has prompted companies to raise prices enthusiastically in response to cost pressures. Demand side, the traditional off-season atmosphere continues, with actual consumption showing limited improvement.

In the short term, ADC12 prices are expected to maintain an upward fluctuating trend, supported by cost factors and policy disruptions, making prices more likely to rise than fall, but weak demand will constrain upside room. If policy impacts deepen or peak season demand is released as expected, prices may break through the current range; conversely, if policy implementation is mild and demand remains weak, prices may continue to consolidate at high levels. Subsequent focus should be on the progress of policy implementation, the recovery of aluminium scrap supply, and marginal improvements in end-use demand.

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.