7.3 SMM Morning Meeting Minutes
Futures: SHFE aluminum closed at 22,510 yuan/mt, edging up 0.09%. The price remained below the MA5 (22,580) and all medium and long-term moving averages, with the bearish alignment of the moving average system continuing, but it has moved sideways around 22,500 for two consecutive days, with the near-term decline slowing somewhat. The MACD indicator showed DIF at -516.94 and DEA at -389.51, with a death cross downward. The negative histogram narrowed to -254.86 (prior day -283.18), with bearish momentum weakening for a second consecutive day. Trading volume shrank to 77,800 lots, with strong wait-and-see sentiment in the market. The suggested core trading range for SHFE aluminum is 22,200-22,700. LME aluminum closed at $3,083/mt, down 0.31%. The price remained well below all key moving averages (MA5=3,115.4, MA10=3,189.45, MA30=3,453.52, MA60=3,507.53), with a bearish alignment of moving averages and continued weakness. The MACD indicator showed DIF at -127.98 and DEA at -99.52, with a death cross downward. The negative histogram narrowed to -56.91 (prior day -56.59), with bearish momentum basically flat. The suggested core trading range for LME aluminum is 3,050-3,110.
Macro front: Data released by the US Bureau of Labor Statistics showed that US nonfarm payrolls rose by 57,000 in June, far below market expectations of 110,000, the lowest level in nearly four months; data for April and May were revised down by a combined 74,000. The unemployment rate unexpectedly fell to 4.2% in June, the lowest level since June 2025, compared to expectations of 4.3%. After the data release, traders fully priced in the US Fed interest rate hike being delayed to December this year. Oman opposes imposing transit fees on ships passing through the Strait of Hormuz, but is open to discussing charges related to maritime services. Meanwhile, some major European nations acknowledged that tolls in the Strait of Hormuz have become inevitable. Earlier, there were reports that Oman had proposed a plan to charge service fees for ships passing through the Strait of Hormuz.
Fundamentals: Supply side, according to SMM data, China’s aluminum production in June 2026 (30 days) increased 2.2% YoY and fell 3.1% MoM. Although weak domestic demand weighed on sectors across the board, aluminum semis export demand provided effective support for domestic liquid aluminum consumption. The domestic proportion of liquid aluminum edged up, with the liquid aluminum ratio rising 0.7 percentage points MoM to 77.2%, primarily driven by improved profits for some processed aluminum semis, which led to a slight increase in liquid aluminum purchasing demand. Inventory side, aluminum inventory continued to destock smoothly this week. As of Thursday, China’s aluminum ingot social inventory fell by 75,000 mt WoW to 1.13 million mt, and fell by 35,000 mt from Monday. Aluminum prices weakened, downstream buying sentiment rebounded, and aluminum ingot warehouse withdrawals hit a nearly four-year high over the past week, driving aluminum ingot destocking. In exports, the SHFE/LME price ratio continued to recover this week. As of July 2, the ratio had rebounded to 7.31, up 12.5% from the earlier low of 6.5, while the import loss narrowed to around 3,300 yuan/mt, a contraction of over 45% from the prior maximum loss of 7,604 yuan/mt. As a result, the profit margin that had been driving heavy aluminum semis exports narrowed rapidly, with new orders already declining in some segments. As orders on hand are gradually fulfilled, if export margins cannot recover, aluminum semis exports may face reduction risks.
Primary Aluminum Market: In early trading, the SHFE aluminum 2606 contract held its center at a higher level compared to the same period of the previous trading day. Warrant-based supply continued to flow into the market, keeping spot supply broadly ample. Downstream saw only sporadic restocking, and with bearish sentiment pervasive in futures, end-user purchase willingness was generally weak. Mainstream transactions were done at parity to a premium of 20 yuan/mt against the SHFE aluminum 07 contract. Yesterday in east China, the selling sentiment index was 2.91, up 0.08 from the previous day; the buying sentiment index was 2.73, flat from the previous day. Futures aluminum pulled back from the previous early session. Yesterday, the spot market in central China saw slightly warmer trading sentiment, with downstream processing enterprises’ sentiment of rushing to buy amid price rises coming into play. The recovery in absolute prices also boosted suppliers’ selling willingness, driving overall trading volume higher from the previous day. Ultimately, actual transaction prices in central China centered around a discount of 40-60 yuan/mt against the SHFE aluminum 07 contract. Yesterday in central China, the selling sentiment index was 2.88, up 0.02 from the previous day; the buying sentiment index was 2.11, up 0.01 from the previous day.
Aluminum Scrap: Yesterday, SMM A00 spot aluminum closed at 22,540 yuan/mt, up 280 yuan/mt from the previous trading day, with aluminum scrap prices broadly following the rise. Supply remained tight. Regulatory oversight on the “reverse invoicing” policy continued to tighten, causing production cuts and shutdowns to spread among small and medium scrap utilization enterprises in Anhui, Jiangxi, and Hubei, while Shandong also saw reports of a halt in reverse invoicing from July, further increasing the scarcity of compliantly invoiced aluminum scrap. In terms of price spreads, on July 2, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 1,929 yuan/mt, and that between A00 aluminum and shredded aluminum tense scrap was 621 yuan/mt, narrowing by 208 yuan/mt and 539 yuan/mt, respectively, from last Thursday. Notably, under the dual impact of rapidly falling aluminum prices and tight invoice availability, the price spread for tense scrap narrowed sharply. Some cast aluminum alloy enterprises have begun to use A00 aluminum ingots instead of aluminum scrap as raw materials. On the import front, in addition to the lag effect of 1-3 month shipping schedules keeping port arrivals low from June to August, the UAE imposed a four-month temporary ban on aluminum scrap exports starting in June, and the EU plans to impose a 15% tariff from September. These factors have significantly strengthened expectations of tightening supply of high-quality scrap outside China, and the import supply chain will suffer substantial damage. The aluminum scrap market is expected to continue its consolidation in the doldrums, but with limited downside room for prices. The mainstream price range for shredded aluminum tense scrap priced based on aluminum content is expected to operate at 19,200–19,800 yuan/mt (excluding tax). Supply side, constraints from the reverse invoicing policy are unlikely to reverse in the short term, and the tight supply of compliant cargo with invoices persists. On the import front, the lagged suppression effect from multiple headwinds on actual port arrivals will gradually manifest in the coming months, further weakening the supplement from imported aluminum scrap. Demand side, against the deepening off-season, downstream operating rates remain low, terminal orders show little substantial improvement, and scrap utilization enterprises are likely to continue purchasing as needed and maintain low inventory strategies. The price difference between A00 aluminum and aluminum scrap has narrowed to a historical low, greatly eroding the cost advantage of scrap over primary aluminum. If aluminum prices continue to decline, the substitution effect will accelerate.
Secondary Aluminum Alloy: Spot side: Yesterday, ADC12 market quotes generally showed an upward trend. SMM ADC12 price rose 100 yuan/mt from the previous day to 23,800 yuan/mt. Along with the rebound in aluminum prices and aluminum alloy futures, market sentiment partly recovered, and enterprises’ willingness to follow the price increase strengthened notably. Meanwhile, procurement costs for aluminum scrap remain at a relatively high level, providing continuous support to ADC12 prices from the cost side and prompting enterprises to actively lift their quotes. However, from the demand side, improvement in downstream purchasing sentiment has been limited, terminal orders remain mediocre, and market transactions are dominated by just-in-time procurement. The actual transacted volumes after the price increase still need further verification. In the short term, ADC12 prices will continue to move sideways in a narrow range.
Aluminum Market Summary: Macro front saw new bullish signals. US June nonfarm payrolls added only 57,000 jobs, far below expectations, and prior figures were revised sharply lower. Traders fully priced in the Fed’s rate hike being delayed until December, leaving the US dollar under pressure and providing some support to metal prices. The US and Iran have been discussing the return of funds and strait security, and nuclear talks are about to commence. Geopolitical risk premium continues to converge, while disputes over the management of the Strait of Hormuz persist, and the resumption of navigation through the strait remains uncertain. Domestically, the proportion of liquid aluminum continued to rise, and aluminum ingot warehouse withdrawals over the past week hit a near four-year high. The accelerated destocking pace is the biggest highlight recently, but absolute inventory levels remain in a high range. Recently, with the geopolitical risk premium continuing to converge and expectations of new projects coming online outside China, macro headwinds still dominate. LME aluminum faces significant short-term pressure, and China’s domestic aluminum prices are expected to follow LME aluminum in the doldrums.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make prudent decisions and not substitute this for independent judgment. Any decisions made by clients are not related to SMM.]
