Spot primary aluminium prices decline for three consecutive days, with a marginal improvement in market demand

Futures: The aluminium alloy 2603 contract closed at RMB 22,300  per tonne, up RMB 85 yuan or 0.38 per cent from the previous trading day, indicating signs of short-term stabilisation. The K-value was 20.35, the D-value 24.93, and the J-value 11.2, all within the 20-50 range. The J-line has turned upward from a low level, suggesting rebound momentum after short-term overselling, but it has not yet entered the strong zone. During the current session, the trading volume was 4,427 lots, and open interest was 4,713 lots, down 110 lots from the previous trading day, indicating a convergence of divergence between longs and shorts at the current price level.

Basis daily report: According to SMM data, on February 3, the SMM ADC12 spot price showed a theoretical premium of RMB 1,490  per tonne over the closing price of the cast aluminium alloy most-traded contract (AD2603) at 10:15.

Warrant daily report: SHFE data showed that on February 3, the total registered warrant volume for cast aluminium alloy was 66,913 tonnes, down 812 tonnes from the previous trading day. The total registered volume in Shanghai was 4,971 tonne, down 59 tonne; in Guangdong, 23,283 tonne, down 182 tonne; in Jiangsu, 10,007 tonne, down 239 tonne; in Zhejiang, 22,195 tonne, down 209 tonne; in Chongqing, 5,766 tonne, down 123 tonne; and in Sichuan, 691 tonne, unchanged from the previous trading day.

Aluminium scrap: Yesterday, the spot price of primary aluminium continued to decline from the previous trading day, with SMM A00 spot aluminium closing at RMB 23,290  per tonne. Aluminium scrap market prices followed the decline overall today. Baled UBC was quoted in the range of RMB 16,700-17,100  per tonne (ex-tax), while shredded aluminium tensile scrap (priced based on aluminium content) was quoted in the range of RMB 18,900-19,600  per tonne (ex-tax).

On February 3, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was RMB 3,530  per tonne, and the price difference between A00 aluminium and shredded aluminium tensile scrap was RMB 2,616  per tonne. The aluminium scrap market is expected to hover at highs this week, with the mainstream range for shredded aluminium tensile scrap (priced based on aluminium content) at RMB 19,100-20,000  per tonne (ex-tax). Before the Chinese New Year, it is necessary to closely track the trend of primary aluminium, the progress of lifting environmental protection alerts in central China, and pre-holiday production halts and holidays. Be cautious of a pullback in aluminium scrap driven by aluminium prices retreating after a rapid rise, and the market trading atmosphere is expected to remain sluggish.

Silicon metal: Yesterday, SMM oxygen-blown #553 silicon in east China was quoted at RMB 9,300-9,400  per tonne, and #441 silicon at RMB 9,400-9,600  per tonne, flat from the previous day. Futures prices moved sideways near RMB 8,800-8,900  per tonne. Downstream users and traders generally had bid expectations below the futures price, and market trading was sluggish.

Overseas market: Overseas ADC12 quotes held steady at USD 2,840-2,900 per tonne, while domestic spot prices fell to around RMB 22,700  per tonne, narrowing the immediate import profit to within RMB 100 yuan.

Summary: In the spot market, the price of A00 aluminium fell by RMB 410  per tonne to RMB 23,290  per tonne compared to the previous trading day, while the SMM ADC12 price dropped by RMB 200  per tonne to RMB 23,650  per tonne. Futures continued their downward trend, and quotations in the secondary aluminium market generally followed suit, though the extent of price declines varied among manufacturers. Demand side, purchasing sentiment improved slightly compared to earlier periods, but downstream buyers remained cautious amid expectations of further price declines.

Coupled with increased short-term market volatility, pre-holiday stockpiling willingness remained low. Supply side, as the Chinese New Year approaches, some secondary aluminium plants have arranged early holidays due to factors such as reduced orders and environmental protection-related controls. Production is expected to halt gradually starting from the 5th, with the overall holiday duration extended compared to the same period in previous years. Overall, persistently weak downstream demand and declining raw material costs have weakened fundamental support for prices. In the short term, secondary aluminium alloy prices are expected to remain in the doldrums.

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.