Macroeconomic: The overall macroeconomic was relatively strong. Although the US Fed's interest rate cut expectations have been swinging back and forth, the Bank of Canada and the European Central Bank successively announced interest rate cuts. The Chinese government has been advocating for the digestion of existing housing and the optimization of new housing. The intensified tensions in the Middle East and between Russia and Ukraine have driven up gold prices, shoring up commodity prices.
In May, the operating aluminum capacity in China continued to grow, reaching nearly 43 million mt by the end of the month, with daily output similar to the daily output in October last year. The production resumption in Yunnan is about to end, with the remaining 330,000 mt expected to reach full production by the end of June. In May, aluminum output rose 4.8% YoY to approximately 3.637 million mt. The supply pressure was particularly significant in south-west China and south China, with spot market aluminum prices continuing to show a large discount. The profit of primary processed products such as domestic aluminum billet was poor, the ratio of aluminum liquid usage decreased, and the output of aluminum ingots increased both YoY and MoM, resulting in slow destocking of aluminum ingots. Regarding imported supplement, the average monthly net import volume of primary aluminum from January to April reached a high of 230,000 mt, but since April, the import window for domestic aluminum ingots remained closed. The flow of imported goods into the spot market significantly decreased in May and June, and the net import volume is expected to fall back to around 100,000-150,000 mt. According to SMM data, the aluminum ingot social inventory in May remained at 780,000 mt, indicating slow destocking compared with previous years.
In May, the operating rates of aluminum downstream showed a weak trend. Aluminum prices inhibited end-user consumption in construction, photovoltaics, and automotive sectors, resulting in weak stockpiling willingness in the market. Consequently, the monthly operating rates of mainstream aluminum processing sectors such as aluminum extrusion and aluminum plate/sheet, strip and foil sectors showed a downward trend. In June, companies see limited orders on hand, and operating rates still have a downward trend. In terms of exports, orders for aluminum semis maintain an increase, mainly due to the growth in aluminum semis export profit, which stimulates the enthusiasm for aluminum semis exports. Additionally, regions like the United States imposed tariffs on aluminum semis. Before the policy implementation, overseas end-users concentrated on stockpiling. The US Section 301 tariffs may impact China's aluminum semis exports in Q4. Q2 and Q3 remain a policy transition period, and aluminum semis exports are expected to maintain a growth trend.
From a technical point of view, the most-traded SHFE aluminium contract is expected to move sideways or swing on a strong note after pullback in the period of June 12-July 10. The time series model and neural network model predict the following trends:
1. SMM A00 aluminum average price: moving sideways or swinging on a strong note after pullback;
2. SHFE aluminum prices: moving sideways or swinging on a strong note after pullback;
3. Social inventory of aluminum ingots will fall slightly before increasing;
4. Aluminum billet regional inventories will continue to drop.
Machine learning models predict the price range of the most-traded SHFE aluminium contract to be 20,420-21,790 yuan/mt, with an extreme range of 20,090-21,920 yuan/mt. Futures technical indicators show that aluminum prices may be moving sideways or swinging on a strong note, with 23 out of 43 indicators being neutral, 12 bullish, and 8 bearish. This month, most of the oscillating indicators and momentum indicators pointed to rangebound price movement, with more bullish signals outnumbered bearish ones. In the period of June 12-July 10, prices may continue to swing on a strong note or move sideways. Based on both machine learning and technical indicators, prices are expected to be moving sideways or experiencing a slight pullback followed by a stronger oscillation. The price is expected to find support in the range of [20,100, 20,400] and meet resistance in the range of [21,800, 22,000].
From June 12 to July 10, the US Fed's interest rate cut expectations will weaken, and the US dollar index will consolidate at a high level. In China, the State Council issued an energy saving and carbon reduction action plan, and the aluminum industry needs to deepen improvements in energy consumption and alloying ratios. Favorable policies in real estate and other sectors frequently emerged, boosting end-user consumption. In June, the operating aluminum capacity remained high, and net imports increased YoY, but the demand is transitioning to the off-season. Orders from small and medium-sized aluminum processing enterprises are weak, the supply and demand relationship is weakening, and aluminum prices lack strong driving forces. It is expected to fluctuate between 20,100-21,800 yuan/mt. We need to pay attention to macro sentiment and changes in aluminum consumption both domestically and overseas.
![Downstream Basically Completed Early Stockpiling, Market Transactions Returned to Sluggish [SMM Spot Aluminum Midday Review]](https://imgqn.smm.cn/usercenter/JnyfJ20251217171654.jpg)
