Tightening Liquidity Expectations Strengthen, Aluminum Prices Under Pressure with Short-Term Volatility [SMM Aluminum Morning Meeting Minutes]

5.21 SMM Morning Meeting Minutes
Futures: SHFE aluminum closed at 24,510 yuan/mt yesterday, up 0.35%. The price stood above MA5 (24,423) but remained suppressed by MA10 (24,520), MA30 (24,603.83), and MA60 (24,619.33), with the short-term moving average bearish alignment not yet reversed. MACD indicator DIF = -71.63, DEA = -45.84, the death cross continued, with the negative histogram narrowing to -51.58, indicating slightly weakening bearish momentum. Trading volume shrank to 41,600 lots, with strong wait-and-see sentiment in the market. The suggested core trading range for SHFE aluminum is 24,200-24,700. LME aluminum closed at $3,629/mt, with the price running above all moving averages (MA5 = 3,594.9, MA10 = 3,594.2, MA30 = 3,566.68, MA60 = 3,449.77), showing a bullish alignment. MACD indicator DIF = 35.33, DEA = 35.15, a golden cross emerged, with the histogram turning positive (0.3452), indicating exhaustion of downward momentum and short-term signs of strengthening. The suggested core trading range for LME aluminum is 3,600-3,660.

Macro front: Trump informed Israeli Prime Minister Netanyahu that mediators are drafting a letter of intent, which both the US and Iran will jointly sign to formally end hostilities and initiate a 30-day negotiation covering topics including Iran's nuclear program and navigation through the Strait of Hormuz. The US Fed meeting minutes showed that many policymakers advocated removing the easing bias, most participants believed policy tightening would be needed if inflation persists above 2%, and only a few officials supported future interest rate cuts — the hawkish tone far exceeded market expectations.

Fundamentals side: Ex-China, amid Middle East conflicts, aluminum outside China showed a rigid supply gap, driving continued destocking of LME inventory. As of last Wednesday, LME inventory decreased approximately 11,700 mt YoY to 346,500 mt. The LME aluminum Cash-3M premium structure continued to deepen. Domestically, as of this Monday, SMM aluminum social inventory was approximately 1.435 million mt, an inventory buildup of approximately 7,000 mt compared to last Thursday, with inventory still at high levels, continuing to pressure aluminum prices.

Primary aluminum market: Yesterday during the morning session, SHFE aluminum 2606 contract traded in a range, with the overall price center moving higher compared to the previous trading day. Some downstream enterprises began stockpiling, and overall market buying sentiment rose significantly compared to the previous day. Sellers' sentiment to hold prices firm was prevalent, with some sellers holding back from selling, and mainstream transaction prices continued to rise. The mainstream spot quotation was SMMA00 average price to +20 yuan/mt. East China market shipment sentiment index was 2.95, down 0.02 WoW; purchasing sentiment index was 3.03, up 0.25 WoW. In central China, insufficient invoice quotas restricted suppliers' shipments, with a notable willingness to hold prices firm and hold back from selling, and market transaction prices were relatively high. Moreover, with aluminum prices edging up slightly while sustainability of subsequent orders from downstream processing enterprises remained uncertain, the market trading atmosphere remained sluggish. Ultimately, the actual transaction price range in central China was between central China price at parity and central China price plus 30 yuan premium. Central China market shipment sentiment index was 2.82, down 0.01 WoW; purchasing sentiment index was 2.3, down 0.02 WoW.

Aluminum scrap: Yesterday, primary aluminum prices edged up 60 yuan/mt compared to the previous trading day, while aluminum scrap market prices remained generally stable. According to the latest customs data, China's aluminum scrap imports in April 2026 were approximately 171,000 mt, down approximately 10% YoY. Cumulative imports from January to April 2026 totaled 700,000 mt. In terms of import source countries, the main sources of China's aluminum scrap imports in April were Thailand, the UK, Japan, the US, Australia, and other countries and regions, with Thailand accounting for 20.7% of China's total imports.

Secondary aluminum alloy: Yesterday, the ADC12 market was dominated by stable prices and wait-and-see sentiment. SMM ADC12 price remained flat from the previous day at 23,600 yuan/mt. Demand side, narrow-range aluminum price fluctuations and lackluster downstream purchasing limited upside room for price adjustments. Cost side, tight compliant aluminum scrap supply, persistent invoice shortage issues, and elevated import costs provided clear cost support. Additionally, some producers showed signs of production cuts, and market expectations for subsequent supply tightening warmed up. Combined with cost support, enterprises had a willingness to increase prices in the short term. Overall, ADC12 prices are expected to move sideways in the short term.

Aluminum market summary: Macro front, the US and Iran plan to sign a letter of intent to formally end hostilities and initiate 30-day negotiations, with geopolitical risk trajectory still to be observed; the US Fed meeting minutes were far more hawkish than expected, with most policymakers supporting policy tightening, and expectations of liquidity tightening are overall bearish for metal prices. Fundamentals side, the ex-China supply gap and low inventory still provide bottom support, but high domestic inventory remains the core factor suppressing significant price rallies. Additionally, weak spot market trading performance further limits upside room for aluminum prices. In the short term, aluminum prices are expected to continue the pattern of LME outperforming SHFE, fluctuating at highs.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not use this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]