Geopolitical Risks in the Middle East Cool Down, Aluminum Prices Under Pressure in the Short Term [SMM Aluminum Morning Meeting Minutes]

5.19 SMM Morning Meeting Minutes
Futures: SHFE aluminum closed at 24,320 yuan/mt, up 0.48%, with an intraday high of 24,395 and a low of 24,250. The price barely held above MA30 (24,320) but remained suppressed by MA5 (24,506), MA10 (24,517), and MA60 (24,594), with the short-term moving average bearish alignment unchanged. MACD indicator DIF = -84.97, DEA = -33.26, with negative histogram bars expanding to -103.43 after the death cross, indicating continuously strengthening bearish momentum. Trading volume shrank to 49,800 lots, with the rebound lacking volume support. The suggested core trading range for SHFE aluminum is 24,000-24,500. LME aluminum closed at $3,564.5/mt, edging up 0.20%. The price was below MA10 (3,568.9) but above MA30 (3,555.5), under short-term pressure but with medium-term support still intact. MACD indicator DIF = 30.21, DEA = 35.01, with the death cross continuing and negative histogram bars expanding to -9.6, indicating somewhat strengthening bearish momentum. The suggested core trading range for LME aluminum is 3,530-3,590.

Macro Front: US President Trump posted on social platform "Truth Social" stating that at the request of leaders from Qatar, Saudi Arabia, and the UAE, he had ordered that the originally planned military strike on Iran not be launched on May 19. Trump stated that given serious negotiations were underway and that in the view of these leaders and allies, both sides would eventually reach an agreement. Most importantly, this agreement would explicitly include the following core terms: Iran shall not possess nuclear weapons.

Fundamentals: Outside China, amid Middle East conflicts, ex-China aluminum exhibited a rigid supply gap, driving LME inventory to continue destocking. As of last Wednesday, LME inventory decreased by approximately 11,700 mt YoY to 346,500 mt. The LME aluminum Cash-3M premium structure continued to deepen. In China, 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 elevated levels, continuing to exert pressure on aluminum prices.

Primary Aluminum Market: Yesterday during the morning session, SHFE aluminum 2606 contract fluctuated downward, with the overall price center significantly lower than the previous trading day. Market purchasing sentiment remained at a relatively weak level. Affected by the sharp decline in aluminum prices, some sellers held back from selling, with strong price-holding sentiment. The mainstream spot cargo quotation was at SMMA00 minus 10 yuan/mt to the average price. The east China market shipments sentiment index was 2.9, down 0.1 WoW; the purchasing sentiment index was 2.83, flat WoW. Yesterday, futures aluminum prices continued to pull back. In the central China market, buying sentiment recovered somewhat, with downstream processing enterprises showing stronger purchase willingness, but some suppliers adopted a wait-and-see attitude, with weakening shipment sentiment. Ultimately, mainstream transaction prices in the central China market hovered between premiums of 10 yuan to 30 yuan over the central China price, with a continued strengthening trend. The shipment sentiment index in the central China market was 2.82, down 0.01 MoM; the procurement sentiment index was 2.29, up 0.03 MoM.

Aluminum scrap: Yesterday, A00 aluminum prices fell 320 yuan/mt from the previous trading day, with aluminum scrap market prices generally following the decline. On the supply side, policy constraints were significant, as strict inspections on reverse invoicing led to a shortage of compliant invoice sources, raising industry costs, with yards generally holding back from selling and holding prices firm. According to survey feedback, warehouse inflows at mainstream yards in east China declined YoY, showing a slight inventory buildup trend, while aluminum tense scrap inventories pulled back somewhat. For imported aluminum scrap, persistently inverted high LME prices made import traders more cautious, and subsequent imports are expected to pull back. On the demand side, entering the traditional consumption off-season, the operating rate of secondary aluminum enterprises pulled back slightly. High tax pressure combined with low-price difficulties forced some enterprises to cut or halt production, further weakening market demand. The aluminum tense scrap segment maintained a low-inventory just-in-time procurement mode, while the wrought aluminum alloy scrap segment, though slightly supported by sheet and strip operations, saw limited overall strength, with sluggish market transactions and strong wait-and-see sentiment.

Secondary aluminum alloy: Yesterday, the ADC12 market was mainly down overall. Driven by the sharp pullback in aluminum prices, most enterprises lowered quotes accordingly, with declines generally controlled within 100-200 yuan/mt, as the cost side still provided some support. Currently, compliant aluminum scrap sources are tightening, forcing some secondary aluminum enterprises to cut production, and market supply has contracted slightly, leading to rising hold-back sentiment amid falling prices, which supported prices. However, persistently weak downstream demand continued to clearly constrain upward price movement. In the short term, ADC12 prices will continue to move sideways in a narrow range. Amid the tug-of-war between cost support and weak demand, downside room is relatively limited, but rebound momentum is also insufficient. On imports, current import ADC12 quotes edged down but remained in the high range of $3,340-3,430/mt, with immediate import losses exceeding 3,000 yuan/mt, keeping the theoretical import window closed.

Aluminum market summary: Macro front, Trump announced the cancellation of the previously planned military strike against Iran, as negotiations made progress through mediation by relevant countries, easing market concerns over escalation of the Middle East conflict. Domestically, high inventory remained the core factor suppressing significant price rallies, and weak spot market transactions further limited upside room for aluminum prices. Aluminum prices are expected to continue the pattern of LME outperforming SHFE and fluctuate at highs in the short term.

[The information provided is for reference only. This article does not constitute direct recommendations for investment research decisions. Clients should make prudent decisions and should not use this as a substitute for independent judgment. Any decisions made by clients have no relation to SMM.]