SMM

In November, aluminum prices first rose and then fell, showing a relatively volatile trend. At the beginning of the month, the most-traded SHFE aluminum contract once surged to 21,790 yuan/mt, hitting a new high in nearly six months, but then quickly retreated, with the price center continuously moving downward. As of November 29, the most-traded SHFE aluminum 2501 contract closed at 20,390 yuan/mt. In the spot market, on November 29, the SMM A00 price fell by 420 yuan/mt from the end of last month to close at 20,360 yuan/mt. The average spot price of SMM aluminum in November (natural month) recorded 20,844 yuan/mt, up 0.5% MoM. Regarding ADC12 prices, ADC12 prices lacked upward momentum in the early period and showed resistance to decline in the later period, with the discount against A00 prices first expanding and then narrowing. As of November 29, the quotations from large domestic secondary aluminum enterprises fell by 200 yuan/mt from the end of October to 20,500-20,800 yuan/mt; for small and medium-sized plants, prices fell by 300 yuan/mt from the end of October to 20,000-20,300 yuan/mt, with the monthly average price up 0.3% MoM.

Cost side, in terms of aluminum scrap, the overall operating rate of scrap-using enterprises increased in November, coupled with the commissioning of some new capacities within the industry, keeping domestic demand for aluminum scrap at a high level. However, due to the rapid rise in aluminum prices at the beginning of the month, the purchase willingness of secondary aluminum plants declined, leading to a lag in the aluminum scrap market's follow-up, with a significant expansion in the price difference between A00 aluminum and aluminum scrap. After mid-month, aluminum prices gradually weakened, and factors such as rain and snow in the north affected the purchase volume of some yards, tightening the overall supply of aluminum scrap again, resulting in limited price declines for aluminum scrap and a continuous narrowing of the price difference between A00 aluminum and aluminum scrap. On the import side, the new domestic aluminum scrap import policy was implemented on November 15, but the actual execution was not smooth. On one hand, the newly added aluminum scrap import categories are subject to a 1.5% import tariff, and the domestic and overseas prices are inverted, making the import advantage not obvious. On the other hand, domestic inspections are relatively strict, and customs clearance at ports in Malaysia and Thailand is obstructed, affecting the arrival volume of imported aluminum scrap. Therefore, the supplementary volume of imports after the new policy is not sufficient.


Regarding silicon, silicon prices remained stable with slight declines in November. As of November 29, the price of above-standard #553 silicon metal fell by 150 yuan/mt from the end of last month to 11,700 yuan/mt, retracting the gains since October. Currently, news of production cuts on the supply side of silicon provides some bullish support to the market, but the subsequent demand increase is lacking, and market sentiment has not reversed, maintaining a cautious outlook for the future. Recent market news is still difficult to stimulate spot silicon metal prices to rise, and the tug-of-war between longs and shorts is expected to keep spot silicon metal prices rangebound in the short term.

Overall, the weighted average cost of the ADC12 industry in November increased by 0.4% compared to October, with the main factor driving the cost increase still being aluminum scrap prices, whose proportion rose by 0.1 percentage points from the previous month to 89.14%. The cost of copper elements slightly decreased by 0.1 percentage points to 3.07%, while other costs remained unchanged. Due to the increase in raw material costs exceeding the price increase of finished ingots, the theoretical losses faced by the industry expanded in November.

Additionally, the industry is generally concerned about the news that automakers are demanding price reductions from suppliers. For example, on November 27, an automaker sent a price reduction letter to suppliers, requesting a 10% price reduction for supplied products starting from January 1, 2025. Although annual price adjustments by automakers are customary in the industry, the current profit margins of the industry chain are relatively low, and it is highly likely that auto parts manufacturers will pass the cost pressure upstream to aluminum alloy enterprises, further compressing the already thin profit margins of ADC12.

Demand side, the orders in the secondary aluminum industry in November increased slightly. According to the China Automobile Dealers Association, under the encouragement of the national scrappage and renewal policy and local trade-in subsidies, recent car purchase consumption has shown a strong growth trend. The strong consumption of automobiles and other products has also driven the continuous release of orders from secondary aluminum plants. However, due to the strong volatility of aluminum prices in November, the purchase willingness of downstream enterprises was affected, and the actual growth effect was not as expected, which also suppressed the price increase of secondary aluminum alloys. Entering December, producers are maintaining a sprint state to achieve their annual targets, and with the year-end subsidy policies coming to an end and the increase in car purchase demand before the Chinese New Year, it is expected that December sales will further increase compared to November, likely continuing the trend of YoY and MoM growth.

Supply side, driven by the year-end order rush from end-users, the production of large secondary aluminum plants generally rebounded in November, leading to a slight increase in the overall operating rate. However, due to tight raw material supply, the overall production increase was limited. Other enterprises also faced challenges such as raw material shortages, production losses, or insufficient orders, making it difficult to increase or even maintain production. In December, the supply of aluminum scrap is expected to tighten again, and with insufficient raw materials, the operating rate of secondary aluminum alloys is expected to weaken slightly.

On the import side, according to customs data, the import volume of unwrought aluminum alloys in October 2024 was 115,300 mt, up 5.9% YoY and 21.8% MoM. After August, domestic ADC12 prices generally followed the rapid rise in aluminum prices, and the RMB entered a rapid appreciation channel, breaking the 7.0 mark in September. At this time, the price increase overseas was weaker than domestically, and the immediate profit and loss of ADC12 imports quickly turned to a profitable state, maintaining profitability for a long time. Additionally, the traditional "September-October peak season" expectations stimulated import demand, driving the import volume in October to rise again above 100,000 mt. After mid-November, port congestion occurred in Malaysia, and it is expected that some imported aluminum alloys will be delayed in arriving at ports, with a slight decline in arrivals expected in the coming days.

Overall, in November, secondary aluminum alloys showed resistance to price declines under cost pressure, while factors such as low downstream acceptance and fierce market price competition limited the price increase, causing ADC12 prices to fluctuate rangebound around aluminum prices throughout the month. Entering December, the tight supply of aluminum scrap domestically and internationally, coupled with enterprises gradually starting to stockpile before the Chinese New Year, will continue to support ADC12 prices. However, changes in demand are not yet apparent, and it is expected that ADC12 prices will continue to fluctuate rangebound in the short term.