6.17 SMM Morning Meeting Minutes
Futures: The most-traded SHFE aluminum contract opened at 23,900 yuan/mt in the night session of June 16, reached a high of 23,925 yuan/mt and a low of 23,835 yuan/mt, and settled at 23,895 yuan/mt, up 0.27% from the previous close. During this period, prices saw a mild recovery from lows in a choppy fashion, forming a small bullish candlestick while remaining below the 5-period moving average at 23,924.76 and below all medium and long-term moving averages: MA10 (24,000.04), MA20 (24,101.21), MA40 (24,245.53), and MA60 (24,337.30). All moving averages maintained a bearish downward alignment. The prior low at 23,725 provided brief support, with downward momentum showing signs of a slowdown in the short term. Trading volume during this period was 55,800 lots, a significant contraction from the previous session, while open interest stood at 227,000 lots, down 2,532 lots from before. The futures presented a pattern of bearish position reduction. From a technical perspective, on the 4-hour MACD indicator, DIFF (-125.37) remained below DEA (-111.23), sustaining a death cross structure, with the green histogram at -28.27, indicating bearish momentum was still in strong territory. On June 15, LME aluminum opened at $3,400.0/mt, reached a high of $3,400.0/mt and a low of $3,334.0/mt, and closed at $3,391.0/mt, up 0.24% from the previous close. The session saw a modest rebound from lows after a sharp decline, remaining below the 5-period moving average at 3,443.76 and below all medium and long-term moving averages: MA10 (3,509.57), MA20 (3,558.58), MA40 (3,552.97), and MA60 (3,511.39), all of which maintained a bearish downward alignment. Trading volume for the day was 41,806 lots, somewhat contracted, and open interest was 634,200 lots, down 9,244 lots, also reflecting bearish position reduction. On the daily MACD indicator, DIFF (-32.35) was below DEA (2.68), with the death cross persisting, and the green histogram at -70.05, showing bearish momentum remained firmly in strong territory.
Macro Front: US President Trump said that negotiations on an agreement with Iran have entered phase two, adding that “this should be easier than phase one.” Trump stated that the US would not put any funding into Iran, and that the “only thing that matters” to him was that Iran never acquires a nuclear weapon, warning that Iran would suffer a “devastating blow” if its government sought to obtain one. Sources said Iran would be allowed to sell its oil and fuel overseas following the signing of a memorandum of understanding with the US this week. The Bank of Japan announced a 25-basis-point rate hike, raising its policy rate from 0.75% to 1.0%, in line with expectations and to its highest level in 31 years. Starting in April 2027, it will pause its balance-sheet reduction and maintain monthly purchases of Japanese government bonds at around ¥2 trillion.
Fundamentals: In South China, sharply lower absolute prices and steady destocking offset each other, and holders tried to raise prices in early trading. However, with expectations of sustained high spot-futures price spreads, there was still room for hedged selling, which instead eased availability and left upward moves lacking momentum. On the demand side, downstream users were initially cautious but gradually turned to buying the dip after failing to push prices lower, providing some support. Traders were also willing to purchase non-premium cargo, and overall transactions were satisfactory. Aluminum ingot inventory in major consumption areas fell 0.25 MoM, with destocking mainly driven by Guangdong and Wuxi.
Primary aluminum market: The trading center of SHFE aluminum in early trading was far lower than the same time yesterday. The sharp decline in aluminum prices, however, significantly boosted buying sentiment, driving sellers' offers and transaction prices steadily higher. Some sellers held back from selling and raised offers in response to falling prices. Mainstream spot transactions were at a discount of 80-90 yuan/mt against the SHFE July contract. The east China shipment sentiment index today was 2.83, down 0.13 MoM, while the purchase sentiment index was 3.06, up 0.30 MoM. SHFE aluminum futures prices tumbled during yesterday’s night session and this morning’s early trading. In the central China market, buying sentiment among downstream processing enterprises recovered somewhat, and stockpiling willingness increased. Trading firms engaging in both spot and futures markets tended to quickly capture price differences, showing a notable tendency to hold prices firm and hold back from selling, which kept market offers high. Actual transaction prices in the central China market eventually centered on a discount of 120-140 yuan/mt against the SHFE July contract. The central China shipment sentiment index today was 2.91, down 0.01 MoM, and the purchase sentiment index was 2.22, up 0.02 MoM.
Aluminum scrap: Yesterday, the SMM A00 price fell 330 yuan/mt MoM to 23,800 yuan/mt, and the aluminum scrap market broadly followed the decline. On the price difference front, the Foshan price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint was 2,416 yuan/mt on June 16, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,765 yuan/mt. Since enterprise tax costs increased by more than 2% YoY, these spreads narrowed, strengthening the floor for aluminum scrap prices. Supply side, the "reverse invoicing" policy continued to tighten oversight, tax rebates were canceled in some provinces, and stricter tax inspections pushed up the cost of invoiced raw materials, with production cuts and shutdowns spreading further in Anhui, Jiangxi, Hubei, and other areas. Compliance costs in raw material collection remain high currently, available invoiced cargo stayed tight, and invoice scarcity became the core support for aluminum scrap prices. Additionally, the price spread between Chinese and overseas markets remained inverted, leaving cheap, high-quality imports scarce and further weakening their supplement to China’s market. Demand side, the off-season effect deepened, downstream scrap utilization enterprises ran at low operating rates, terminal orders lacked follow-through, and companies maintained a cautious stance of purchasing as needed with low inventory strategies. Orders from downstream die-casting enterprises remain sluggish, with procurement mainly driven by rigid demand and small batches, and a lack of willingness to chase rising prices, keeping overall market trading activity low. End-use consumption shows little substantial improvement, with the demand side continuing to suppress upside room for prices.
Secondary aluminum alloy:The SMM ADC12 average price was 24,100 yuan/mt yesterday, down 100 yuan/mt from the previous day, with mainstream market quotations generally following the decline of 100 yuan/mt. During the day, both cast aluminum futures and aluminum prices weakened, weighing on ADC12 prices to some extent; however, structural issues such as tight tax invoices and difficulties in procuring compliant aluminum scrap have not eased, and production costs of enterprises remain under pressure, providing strong support for spot prices. Overall, the ADC12 market is currently in a tug-of-war pattern of strong cost support and weak demand follow-through. Short-term prices have limited downside room, but also lack sufficient momentum to break upward, and are expected to maintain a sideways trend. Import side, overseas ADC12 quotations continued to pull back to $3,350-3,390/mt, with immediate loss per ton around 2,653 yuan, leaving the import window still closed.
Aluminum market summary:Macro front, the US and Iran have completed the signing of an electronic version of the Memorandum of Understanding, with expectations of easing geopolitical tensions continuing to materialize, market fears of geopolitical conflicts in the Middle East continuing to fade, and the geopolitical risk premium on commodities weakening significantly. US May CPI rose to 4.2% YoY, hitting a three-year high, with core CPI also strengthening. The market continues to bet on the US Fed resuming rate hikes within the year, and expectations of tightening liquidity continue to suppress metal valuations. Fundamentals side, the Middle East conflict has caused passive production cuts of aluminum capacity outside China, with expectations of a widening global supply deficit, coupled with expectations of higher energy costs, providing strong bottom support for LME aluminum. Domestic inventory, the destocking trend has been established, and the destocking logic continues to materialize. The rebound in the proportion of liquid aluminum, support from export demand, and supply standardization compressing aluminum ingot formation are three fundamental factors driving the continuation of destocking. SMM maintains its expectation that inventory will drop to around 1.28 million mt in late June, and could further approach 1.2 million mt at end-June to early July, providing some support for aluminum prices. However, high domestic inventory pressure remains relatively apparent, and with the current bearish macro sentiment dominating the market, short-term domestic aluminum prices are expected to mainly fluctuate weakly and adjust.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and not substitute this for their own independent judgment. Any decisions made by clients are not related to Shanghai Metals Market]
