SMM Aluminum Market Morning Comment (Jun 28)

Overnight, the most-traded SHFE aluminum contract 2408 opened at 20,235 yuan/mt, reached a high of 20,285 yuan/mt, a low of 20,175 yuan/mt, and closed at 20,195 yuan/mt, down 65 yuan/mt, a decrease of 0.32%. On the previous trading day, LME aluminum opened at $2,506.5/mt, reached a high of $2,519.5/mt, a low of $2,486/mt, and closed at $2,496/mt, down $16.54/mt, a decrease of 0.66%.

Summary: From a macro perspective, the US Fed's core PCE price index performed better than expected in the first quarter, indicating that inflationary pressures still exist. On the other hand, personal consumption expenditures grew at a rate lower than expected, creating a contradiction between inflation data and consumption data, which brings uncertainty to future policy-making. Domestically, the policy of trade-in continues to gain momentum, and new real estate policies are being introduced across various regions to further stimulate domestic consumption demand. On the fundamentals, domestic aluminium capacity remains at a high level. Boosted by a rebound in aluminium billet conversion margins, the proportion of aluminium liquid alloying increased, and the production of ingots decreased. Due to the pullback in aluminium prices, daily inventory of aluminium ingots dropped slightly, but social inventory of aluminium ingots remains at a historically high level for the same period, posing some resistance to the destocking. According to the SMM survey, new orders in industries such as photovoltaics and automobiles are not ideal, and the operating rate of aluminium processing enterprises will remain sluggish. Amid a weak macro front, together with the expectation of weakening downstream consumption, market sentiment remains cautious. SMM expects aluminium prices to swing on a soft note in the short term.