High aluminium prices suppress stockpiling demand for the Chinese New Year, extended holiday periods for alloys and downstream die-casting

Futures: The aluminium alloy 2603 contract closed at RMB 22,150 per tonne, up RMB 235 yuan or 1.07 per cent from the previous trading day. Volume was 2,539 lots, and open interest stood at 4,211 lots (down 150 lots from the previous session). After pulling back from the previous high of RMB 24,410 per tonne, prices found support near RMB 21,680 per tonne and rebounded slightly, overall remaining in the doldrums. The K-value was 25.40, the D-value 23.63, and the J-value 28.93; all three lines are within the 20-30 range, at low levels and showing signs of turning upward, indicating potential for a technical rebound after short-term overselling.

Spot-futures price spread daily report: According to SMM data, on February 5, the SMM ADC12 spot price was at a theoretical premium of RMB 1,385 per tonne to the most-traded cast aluminium alloy contract (AD2603) closing price at 10:15.

Warrant daily report: SHFE data showed that on February 5, the total registered volume of cast aluminium alloy warrants was 66,546 tonnes, a decrease of 245 tonnes from the previous trading day. By region: Shanghai's total registered volume was 5,388 tonne, up 447 tonne; Guangdong's total was 23,552 tonne, down 90 tonne; Jiangsu's total was 9,496 tonne, down 421 tonne; Zhejiang's total was 21,833 tonne, down 151 tonne; Chongqing's total was 5,586 tonne, down 30 tonne; Sichuan's total was 691 tonne, unchanged.

Aluminium scrap: Yesterday, spot primary aluminium prices pulled back from the previous session, with SMM A00 spot closing at RMB 23,340 per tonne. Aluminium scrap market prices generally followed the decline today. Baled UBC was quoted at RMB 16,850-17,300 per tonne (ex-tax), while shredded aluminium tensile scrap (priced based on aluminium content) was quoted at RMB 18,900-19,600 per tonne (ex-tax). On February 5, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 3,560 per tonne, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,646 per tonne. 

The aluminium scrap market is expected to hover at highs next week, with shredded aluminium tensile scrap (priced based on aluminium content) mainly trading in the range of RMB 19,000-19,800 per tonne (ex-tax). Close attention should be paid to the shutdown and resumption of downstream processing enterprises and the progress of environmental protection enforcement in various regions, while remaining vigilant against a continued sluggish trading atmosphere in the aluminium scrap market if aluminium prices pull back again.

Silicon metal: On February 5, SMM non-oxygen blown #553 in east China was at RMB 9,100-9,300 per tonne; oxygen-blown #553 at RMB 9,300-9,400 per tonne; #521 at RMB 9,400-9,500 per tonne; #441 at RMB 9,400-9,600 per tonne; #421 at RMB 9,500-9,800 per tonne; #421 for silicone use at RMB 9,800-10,200 per tonne; and #3303 at RMB 10,200-10,500 per tonne. Prices in Huangpu Port, Tianjin, Northwest China, Kunming, Shanghai, Xinjiang, and Sichuan held steady.

Overseas market: Overseas ADC12 offers continued to hold steady at USD 2,840–2,900 per tonne, while domestic spot prices pulled back to RMB 23,700 per tonne. Due to firm overseas prices, the import advantage narrowed significantly, and the immediate import profit/loss turned to a slight loss.

Summary: In the spot market, the A00 aluminium price dropped by RMB 420 per tonne from the previous trading day to RMB 23,340 per tonne, and the SMM ADC12 price was lowered by RMB 200 per tonne to RMB 23,600 per tonne. As futures weakened again, the secondary aluminium market offers generally followed the decline, with most enterprises cutting prices by about RMB 200 per tonne. Driven by the price pullback, downstream consumers mainly restocked on dips, leading to a slight improvement in transactions. Supply side, as the Chinese New Year approaches, secondary aluminium plants have successively clarified their production plans for the holiday. Most enterprises will suspend production between February 5 and 13, with resumption times concentrated after the eighth day of the first lunar month or after the Lantern Festival. The expected furnace shutdown period is 8–20 days, with the average shutdown duration extending by about 2 days YoY, mainly due to intensified aluminium price fluctuations, widespread downstream production cuts, and ongoing constraints from tightening policies and environmental protection-related controls. Overall, downstream demand continues to contract, and fundamental support for prices is marginally weakening. In the short term, secondary aluminium alloy prices are expected to hover at highs, with the price centre likely to drop back slightly.

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.