SMM Aluminum Market Morning Comment (June 3)

Last Friday night, the most-traded SHFE 2407 aluminum contract opened at 21,630 yuan/mt, with a high of 21,670 yuan/mt, a low of 21,080 yuan/mt, and closed at 21,145 yuan/mt, down 295 yuan/mt, a decrease of 1.38%. The previous trading day, LME aluminum opened at $2,705.5/mt, with a high of $2,737/mt, a low of $2,643/mt, and closed at $2,655/mt, down $50/mt, a decrease of 1.85%.

Summary: Overall, from a macro perspective, the State Council issued the "Action Plan" to guide the optimization of capacity in the aluminum industry and achieve high-quality development. Multiple favorable factors boosted aluminum prices. The market is concerned that capacities failing to meet energy consumption standards by 2025 will be required to undergo technological upgrades or exit the market. However, in recent years, domestic aluminum plants have been undergoing intensive maintenance and technological upgrades, with most capacities meeting industry energy consumption standards. This plan may further promote rapid optimization and technological upgrades in the industry, but the likelihood of voluntary exit under high profits is low. Fundamentally, domestic aluminium operating capacity continues to rise, with good progress in Yunnan's resumption, which may be completed in June, gradually highlighting supply pressure. Social inventory of aluminum ingots has been accumulating continuously. From the demand, recent aluminum prices hit a record high for the year and have shown strong volatility, inhibiting downstream procurement enthusiasm, leading to a decline in orders and operating rates for aluminum processing enterprises. Additionally, as the market transitions between peak and off-peak seasons, orders in multiple sectors have shown slight declines, and the overall operating rate is expected to weaken steadily. SMM expects short-term aluminum prices to maintain wide fluctuations at a high level.