Dramatic Reversal in US-Iran Conflict, ECB Rate Hike Pressures Metal Prices [SMM Aluminum Morning Meeting Summary]

6.12 SMM Morning Briefing

Futures: SHFE aluminum closed at 24,155 yuan/mt in the daytime session, up 0.62%, remaining below all key moving averages (MA5≈24,072, MA10≈24,300, MA30≈24,450, MA60≈24,590), with clear downward pressure from short-term MAs and the bearish alignment still in place. The MACD indicator showed DIF=-145.65, DEA=-115.87; the death cross persisted, and the negative histogram narrowed to -61.57 (vs. -98.93 the prior day), suggesting weakening bearish momentum. Trading volume shrank to 71,700 lots, indicating the rebound lacked volume support. The suggested core range for SHFE aluminum is 23,900–24,300. LME aluminum settled at $3,539/mt, up 0.41%, with an intraday range of $3,527.5–$3,545.5. The price moved back above the MA60 ($3,526.37) but remained capped by the MA5 (around $3,544), and the short-term moving average bearish alignment had yet to reverse. The MACD: DIF=-4.66, DEA=19.36; the death cross persisted, and the negative histogram narrowed to -48.05 (vs. -55.71 the prior day), suggesting a slight easing of bearish momentum. The suggested core range for LME aluminum is $3,500–$3,570.

Macro: The Middle East situation took a dramatic turn. On June 11, US President Trump posted on social media that, given that the results of consultations with Iran had been submitted to Iran’s supreme leadership and approved, he had canceled the strike and bombing operations originally planned for that night against Iran. Trump stated that until the final signing of this agreement, the US maritime blockade against Iran would remain in full effect. The ECB announced a 25bp rate hike, its first since September 2023, becoming the first major central bank globally to raise rates due to the Middle East conflict. The ECB did not pre-commit to a specific rate path but noted that if energy prices remained elevated and triggered second-round effects, it could tighten policy further. The ECB also lowered its 2026 economic growth forecast for the eurozone to 0.8% and raised its inflation expectations to 3%.

Fundamentals: Supply side, according to SMM data, China’s aluminum output edged down this week, while the proportion of liquid aluminum increased slightly by 0.16ppt WoW. Downstream demand for liquid aluminum was moderate, with the key focus remaining on aluminum semis exports. On the inventory front, as of Thursday this week, domestic aluminum ingot social inventory stood at 1.312 million mt, down 48,000 mt from Monday and 63,000 mt from last Thursday—a notable acceleration in destocking. However, due to substitution between aluminum ingot and billet, the destocking of domestic aluminum billet social inventory slowed this week. Demand side, the downstream processing sector was overall sluggish during the consumption off-season. While strong export demand in some segments provided a partial offset, weekly operating rates for aluminum plate/sheet and strip, aluminum foil, and aluminum wire and cable weakened, and the aluminum extrusion segment faced intensifying downward pressure. Overall, the weekly operating rate of downstream bellwether companies fell another 0.4ppt WoW this week.

Primary Aluminum Market: The SHFE aluminum 2606 contract fluctuated upward in early trading, with the overall price center moving higher compared to the previous trading day. The sell-side sentiment improved yesterday, with sellers raising their quotes. However, higher aluminum prices dampened downstream purchasing sentiment. Mainstream spot transactions were concluded at discounts of 90-120 yuan/mt against the SHFE July contract. The east China sell-side sentiment index was 2.89 yesterday, up 0.03 WoW; the purchasing sentiment index was 286, down 0.04 WoW. Aluminum futures prices saw a slight correction. The sell-side sentiment in central China improved further yesterday from the previous two days, but downstream processing enterprises preferred to purchase at low premiums, while suppliers lacked the willingness to hold prices firm. Market quotes trended lower throughout the session, gradually shifting from discounts of 100-110 yuan/mt against the SHFE July contract before market open to discounts of 120-140 yuan/mt against the SHFE July contract, with the mainstream trading range at discounts of 120-140 yuan/mt against the SHFE July contract. The central China sell-side sentiment index was 2.9 yesterday, up 0.01 WoW; the purchasing sentiment index was 2.22, flat WoW.

Secondary Aluminum Raw Materials: SMM A00 aluminum price rebounded 190 yuan/mt to 23,970 yuan/mt yesterday compared to the previous trading day, while the aluminum scrap market followed the decline slightly. On the price difference front, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 2,598 yuan/mt on June 11, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,060 yuan/mt. The continued narrowing of these price spreads reflects strong bottom support for aluminum scrap. Supply side, the "reverse invoicing" policy oversight continues to tighten, with the cancellation of tax rebates in certain provinces and stricter tax audits leading to higher costs for invoice-backed raw materials, causing production cuts and shutdowns to spread further among enterprises in Anhui, Jiangxi, and Hubei. High compliance costs in the raw material collection process persist, and the availability of invoice-backed cargoes remains tight, making invoice scarcity a core support factor for aluminum scrap prices. Meanwhile, the persistent price spread inversion between Chinese and overseas markets limits the availability of low-priced, high-quality imported scrap, further weakening overseas supplementation. Demand side, the off-season effect continues to deepen. The operating rate at downstream scrap utilization enterprises remains low, with end-user order follow-through sluggish. Enterprises are maintaining a strategy of purchasing as needed and keeping low inventory, resulting in a cautious procurement atmosphere. Downstream die-casting enterprises continue to see sluggish orders, with purchases primarily based on rigid demand in small batches. There is insufficient willingness to rush to buy amid continuous price rise, and overall market trading activity remains low. End-use consumption is unlikely to see substantive improvement, and the demand side continues to cap the upside room for prices. Aluminum scrap prices are expected to remain rangebound at high levels with a weak bias, but the downside room is limited. The tightness of invoice-backed compliant cargoes will persist, providing bottom support for aluminum scrap prices. The lagged contraction effect of imported aluminum scrap has not yet fully played out, and port arrivals will remain low going forward. The renewed escalation of the US-Iran conflict is exacerbating the price spread inversion between Chinese and overseas markets, keeping overseas supplementation constrained. Meanwhile, as the off-season deepens, concerns mount over the sustainability of orders for downstream scrap utilization enterprises. Enterprises maintain strategies of purchasing as needed and keeping low inventory levels, with the buying sentiment unlikely to improve significantly. The overall pattern reflects supply-demand weakness.

Secondary Aluminum Alloy: Spot market: Yesterday, mainstream enterprises in the ADC12 market generally raised their quoted prices by 100 yuan/mt, with the price center continuing to shift upward. SMM’s ADC12 quoted price rose to 24,000 yuan/mt. Raw material procurement and compliance operating costs remain high, significantly squeezing corporate profits and driving producers to raise prices and pass on cost pressures. Meanwhile, supply has tightened somewhat, finished product inventories at enterprises are on the low side, and spot cargo availability is relatively tight. However, market demand remains weak, and downstream purchasing willingness has yet to show a clear recovery. Most enterprises reported stable orders, with transactions still mainly need-based. With limited demand support, the capacity to absorb the price increases in actual transactions continues to be tested. Overall, the current ADC12 market is characterized by “cost-driven price rises and demand-limited gains.” Near-term prices may continue to hold up well, but further upside room will depend on the pace of downstream demand recovery.

Aluminum Market Summary: Macro front, the US-Iran conflict took a dramatic turn, with Trump calling off the strike, but the maritime blockade persists. Yet, the market has become desensitized to repeated similar episodes, and geopolitical risk premiums are marginally diminishing. The ECB raised interest rates by 25 basis points, lowered its economic growth forecast, and raised its inflation expectations. External liquidity tightening and demand concerns are weighing on metal prices. Fundamentals side, the overseas supply gap is expected to provide strong bottom support for aluminum prices, and expectations of rising energy costs are also providing a moderately bullish driver for aluminum prices. On Thursday, the destocking pace of domestic aluminum ingot social inventory accelerated notably, effectively alleviating the earlier high inventory pressure. However, the pressure from high domestic inventories remains relatively pronounced, which is expected to limit upside room for domestic aluminum prices. Near-term domestic aluminum prices are expected to trade mainly in a consolidative range.

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