Ex-China Premium Collapse Bets on Accelerated China Destocking; Aluminum Price Under Short-Term Pressure and Fluctuation [SMM Aluminum Morning Briefing]

6.22 SMM Morning Briefing

FuturesSHFE aluminum closed at 23,980 yuan/mt ahead of the holiday, with the price far below the MA5 (24,005), MA30 (24,354.17), and MA60 (24,535.42). The moving averages were in a bearish alignment and diverging at an accelerating pace, indicating a notably weak pattern. The MACD showed DIF at -170.75 and DEA at -144.14, with a death cross pointing downward and the negative bar expanding to -53.21, as bearish momentum continued to strengthen. Trading volume remained low at 120,500 lots, reflecting subdued market participation. The suggested core trading range for SHFE aluminum is 23,700–24,200 yuan/mt. LME aluminum closed at $3,396.5/mt, edging down 0.03%, with intraday fluctuations of $3,392.5–3,403.5/mt. The price was far below all key moving averages (MA5 at 3,400.6, MA10 at 3,448, MA30 at 3,577.2, MA60 at 3,541.28), with the system in a bearish alignment and the medium-term trend weakening notably. The MACD showed DIF at -53.13 and DEA at -27.31, with a death cross pointing downward and the negative bar expanding to -51.65, as bearish momentum continued to strengthen. The suggested core trading range for LME aluminum is $3,380–3,420/mt.

Macro FrontUS-Iran negotiations continued to advance. Iran indicated that a draft exemption for oil sanctions had been largely finalized, and US Vice President Vance also stated that significant progress had been made. However, Iran still said the Strait of Hormuz had not been reopened, while Trump threatened to take military action again if talks broke down. Uncertainty in the Middle East situation remained.

FundamentalsAgainst the backdrop of high aluminum prices, new capacity outside China was commissioned ahead of schedule, and the LME aluminum Cash-3M premium narrowed significantly — from a historical high of +$104.6/mt on June 1 to -$1.5/mt on June 17, shifting from backwardation to a contango structure. In China, domestic fundamentals showed positive signals this week. On the inventory front, domestic social inventory of aluminum ingots stood at 1.242 million mt on Monday this week, down 13,000 mt from last Thursday, reinforcing the ongoing destocking trend.

Primary Aluminum MarketDuring the morning session, the SHFE aluminum 2606 contract fluctuated, with its trading center lower than the same time the previous day. Affected by falling aluminum prices and pre-holiday stockpiling, buying sentiment among buyers remained relatively active last Thursday. Strong destocking performance pushed sellers' offer prices and transaction prices continuously higher. Mainstream spot transaction prices were at a discount of 50–60 yuan/mt against the SHFE July aluminum contract. Mainstream spot transaction prices were at a discount of 60–80 yuan/mt against the SHFE July aluminum contract. Last Thursday in the East China market, the shipment sentiment index was 2.91, flat MoM; the purchase sentiment index was 3.20, up 0.14 MoM. Last Thursday, the final trading day before the Dragon Boat Festival, downstream processing enterprises in the Central China market showed strong purchasing interest, leading to relatively active overall transactions, though actual transaction prices remained weak. Traders holding cargo are inclined to sell aggressively before the holiday to avoid price fluctuation risks during the holiday. Ultimately, transaction prices in the central China market were at a discount of 70-100 yuan/mt against the SHFE aluminum July contract. Last Thursday, the selling sentiment index in the central China market was 2.93, up 0.01 WoW; the purchasing sentiment index was 2.23, up 0.02 WoW.

Aluminum Scrap:Last Thursday, the SMM A00 price rose 10 yuan/mt from the previous trading day to 23,870 yuan/mt, while the aluminum scrap market remained stable overall. On the price difference front, on June 18, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,347 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,696 yuan/mt, narrowing by 251 yuan/mt and 364 yuan/mt, respectively, WoW. Corporate tax costs increased by more than 2% YoY. The continuous narrowing of the price spread between A00 aluminum and aluminum scrap reflects relatively firm bottom support for aluminum scrap. Supply side, tightening regulatory oversight over the "reverse invoicing" policy, the cancellation of tax rebates in some provinces, and intensified tax inspections have driven up the cost of invoice-carrying raw materials. The persistent price spread inversion between Chinese and overseas markets has kept low-priced, high-quality imported supply scarce, further weakening its supplementation to the domestic market. Demand side, the off-season effect is deepening, with downstream scrap utilization enterprises operating at low rates, weak follow-through on end-user orders, and enterprises maintaining cautious purchasing-as-needed and low-inventory strategies. As the Dragon Boat Festival holiday approaches, downstream scrap utilization enterprises show limited purchasing interest, with no visible holiday stockpiling. Some yards have shut down for 1-2 days due to insufficient shipment orders. The aluminum scrap market is expected to continue its high-level, weak fluctuation pattern. The tight supply of compliant invoice-carrying cargo, combined with expanding production cuts and suspensions, reinforces expectations of shrinking aluminum scrap supply, providing bottom support for prices. Demand side, downstream secondary cast aluminum alloy orders remain sluggish, and support from wrought aluminum alloy purchases has also weakened, making it difficult for end-use consumption to improve materially. The aluminum scrap market's supply-demand weakness is unlikely to reverse in the short term.

Secondary Aluminum Alloy:Spot market: Last Thursday, the ADC12 market continued its stable price trend with limited fluctuations, as SMM ADC12 held steady at 24,100 yuan/mt. With the Dragon Boat Festival approaching, downstream die-casting enterprises showed limited purchasing interest, mainly restocking as needed, and no significant holiday stockpiling was seen. Amid a lack of fresh drivers from both supply and demand sides, enterprises generally maintained stable prices and adopted a wait-and-see stance, with transactions dominated by rigid demand orders. In the short term, ADC12 prices are expected to continue moving sideways, with future focus on aluminum price trends, aluminum scrap supply, and the recovery of downstream orders after the holiday for market impact.

Aluminum Market Summary:The geopolitical risk premium is fading rapidly as the US-Iran peace agreement takes effect, and expectations of new project startups outside China are adding pressure, leaving LME aluminum under significant near-term strain. The Fed's dot plot releasing a hawkish shift makes the global macro front turn more bearish, exerting downward pressure on aluminum prices. China side, the accelerating destocking pace is a highlight, but absolute inventory remains in a relatively high range. SHFE aluminum, without new macro-positive factors, follows LME aluminum under pressure, but supported by domestic destocking, the decline is relatively manageable. It is expected that aluminum prices will be in the doldrums in the short term.

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