Tug-of-war between aluminium scrap sellers and buyers intensifies, spot-futures price spread for cast aluminium alloy widens again

Futures: The most-traded cast aluminium alloy AD2511 contract opened at the day's high of RMB 20,350 per tonne on Friday night, hitting an intraday high of RMB 20,365 per tonne and a low of RMB 20,270 per tonne, before closing at RMB 20,325 per tonne, down RMB 25 per tonne (0.12 per cent) from the previous settlement. Trading volume stood at 571 lots, while open interest declined to 8,297 lots, mainly due to long position liquidation.

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Spot-Futures Price Spread Report: According to SMM data, the spot price of SMM ADC12 showed a theoretical premium of RMB 495 per tonne against the closing price of the most-traded cast aluminium alloy contract (AD2511) at 10:15 am on August 29, with the spread widening.

Aluminium scrap: Spot primary aluminium prices fell MoM on Monday, with SMM A00 spot aluminium closing at RMB 20,620 per tonne, while aluminium scrap prices followed the downtrend. As the traditional peak season approaches, orders at some downstream scrap utilisation enterprises recovered. However, tight supply remained the dominant theme in the scrap market, keeping purchasing prices elevated and generally tracking aluminium price movements.

Baled UBC and shredded aluminium tense scrap (priced based on aluminium content) dropped RMB 100 per tonne W-o-W. Jiangxi saw significant adjustments in scrap aluminium offers yesterday, with aluminium tense scrap down RMB 100 per tonne and wrought aluminium alloy scrap down 200-300 per tonne, indicating initial policy impact.

SMM expects aluminium scrap prices to hover at highs this week amid intensifying tug-of-war between sellers and buyers. From a macro perspective, the ongoing nationwide crackdown on irregular tax rebates will profoundly reshape the cost structure of the secondary aluminium industry. During the policy transition period, downstream scrap users may further bargain down purchasing prices to offset potential tax cost increases, exacerbating downside risks for scrap prices. Nevertheless, tight supply conditions are unlikely to ease in the short term, particularly for shredded aluminium tense scrap, which will continue to bolster suppliers' pricing power.

SMM forecasts shredded aluminium tense scrap (priced based on aluminium content) to trade within RMB 17,100-17,600 per tonne (ex-tax), while baled UBC prices may fluctuate between RMB 15,500-16,000 per tonne (ex-tax) supported by rigid demand. Overall, the market should closely monitor policy implementation and September peak season consumption recovery, with price trends depending on the interplay between cost transmission and supply constraints.

Silicon metal: On September 1, SMM east China non-oxygen blown #553 silicon metal traded at RMB 8,900-9,000 per tonne; oxygen-blown #553 at RMB 9,000-9,100 per tonne; #521 at RMB 9,200-9,300 per tonne; #441 at RMB 9,200-9,500 per tonne; #421 at RMB 9,300-9,500 per tonne; #421 for silicone use at RMB 9,600-10,100 per tonne; and #3303 at RMB 10,200-10,400 per tonne. Prices edged down in select areas of Tianjin and north-west China, while remaining stable in Kunming, Huangpu Port, Sichuan, Xinjiang, and Shanghai.

Overseas markets: Current overseas ADC12 offers stood at USD 2,480-2,500 per tonne. With rising domestic prices and a stronger RMB, import losses narrowed further to around RMB 200 per tonne. Local ex-tax ADC12 offers in Thailand temporarily held at 83-84 THB per kg.

Inventory: According to SMM statistics, the combined daily social inventory of secondary aluminium alloy ingots in Foshan, Ningbo, and Wuxi totalled 34,501 tonnes on September 2, an increase of 786 tonnes from the previous trading day and 2,128 tonnes W-o-W (August 25).

Summary: Aluminium prices fluctuated downward yesterday, while SMM ADC12 prices held steady at RMB 20,750 per tonne.

Post-September regional tax rebate policies remain unclear, leading to strong wait-and-see sentiment in the secondary aluminium market. Coupled with tight raw material supply, firm cost support kept manufacturers' offers steady. Demand side, the approaching traditional peak season drove a slight recovery in downstream procurement, but high prices restrained transaction volumes, with actual end-use demand remaining mediocre. ADC12 prices are expected to continue fluctuating upward in the short term, supported by costs, low inventory, and policy pressure.

However, slow demand recovery may limit upside room. Future focus should be on policy implementation progress, aluminium scrap supply recovery, and marginal changes 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.