Decline in downstream operating rates coupled with concentrated arrivals after the holiday, domestic aluminum prices in the doldrums【SMM Aluminum Morning Meeting Summary】

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5.6 SMM Aluminum Morning Meeting Summary

Futures market: Before the holiday, the most-traded SHFE aluminum 2506 contract opened at 20,035 yuan/mt, with a high of 20,035 yuan/mt, a low of 19,900 yuan/mt, and closed at 19,910 yuan/mt, down 0.65%. Trading volume was 73,500 lots, and open interest was 184,000 lots. LME aluminum opened at $2,444/mt before the holiday, with a high of $2,450/mt, a low of $2,440/mt, and closed at $2,442.5/mt, up $11/mt, or 0.45%.

Macro: (1) Chinese Ambassador to the US Xie Feng pointed out that China-US economic and trade cooperation is generally balanced and mutually beneficial. Indiscriminate tariffs harm both sides, disrupt normal business operations and people's consumption, trigger severe fluctuations in global financial markets, and undermine long-term stable growth of the world economy. (Neutral★) (2) Russian Presidential Press Secretary Peskov stated at a briefing that Russia has repeatedly noted reports of a meeting between Russian and US leaders, and from various considerations, Russia believes such a meeting is necessary. (Bullish★)

Fundamentals: (1) On April 30, SMM statistics showed that aluminum inventory in the Shanghai Bonded Zone was 89,800 mt, and in the Guangdong Bonded Zone was 19,700 mt, totaling 109,500 mt, an increase of 4,000 mt WoW. (Bearish★) (2) According to SMM statistics, on May 6, domestic mainstream consumption areas' aluminum ingot inventory was 636,000 mt, an increase of 22,000 mt from before the holiday. (Bearish★)

Primary aluminum market: Before the holiday, the SHFE aluminum center fell to around 20,050 yuan/mt in the early session, fluctuating rangebound. In the spot market, spot supply in east China was relatively ample, and downstream restocking sentiment slowed slightly due to rising aluminum prices. With most enterprises' orders on hand starting to weaken and restocking completed, purchasing was weak ahead of the upcoming holiday. The market saw a discount of 10 yuan/mt against SMM transactions. SMM A00 aluminum was quoted at 20,060 yuan/mt, up 40 yuan/mt before the holiday, at a discount of 10 yuan/mt against the 05 contract, down 10 yuan/mt before the holiday. In central China, with several days of stockpiling, inventory in the region continued to decline, and spot supply tightened intraday. Suppliers took the opportunity to raise premiums for sales, but most downstream enterprises had completed stockpiling, and intraday transaction prices in central China fell.

Secondary aluminum raw materials: Spot primary aluminum rose 40 yuan/mt before the holiday, with SMM A00 spot closing at 20,060 yuan/mt. Overall aluminum scrap prices followed primary aluminum higher. As the traditional "golden March and silver April" peak season neared its end, new orders from end-users were weak, and downstream processing enterprises' risk aversion sentiment intensified, maintaining raw material purchasing as needed. On April 30, baled UBC aluminum scrap was quoted at 15,050-15,650 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 15,850-17,350 yuan/mt (excluding tax). By product, supply of bare bright aluminum wire and shredded wrought aluminum alloy scrap remained tight, with price adjustments of 50-100 yuan/mt. Shredded aluminum tense scrap prices generally rose 100-200 yuan/mt due to pre-holiday stockpiling by downstream scrap utilization enterprises. In terms of price differences, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 14 yuan to 1,832 yuan/mt before the holiday, and the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed significantly by 70 yuan to 1,589 yuan/mt. In the short term, the aluminum scrap market is likely to hover at highs, but if primary aluminum experiences strong fluctuations due to macro factors (such as US Fed policy or geopolitical conflicts) or domestic secondary aluminum enterprises collectively cut production, aluminum scrap prices may face periodic pressure.

Secondary aluminum alloy: Before the holiday, aluminum prices rose slightly by 40 yuan/mt to 20,060 yuan/mt, while domestic SMM ADC12 prices remained in the range of 20,400-20,600 yuan/mt. In the import market, overseas ADC12 quotations were maintained at $2,430-2,450/mt, with immediate losses for imported ADC12 at around 700 yuan/mt. On the last trading day before the Labour Day holiday, market transactions continued to be sluggish due to downstream enterprises' 2-5 day holiday arrangements and weak pre-holiday stockpiling intentions. Current market expectations for May demand are generally weak, and ADC12 prices are expected to remain in a weak consolidation pattern in the short term.

Summary: From a macro perspective, a series of relevant policies introduced domestically have played a positive role in stabilizing the real estate market, and the domestic macro bullish atmosphere remains unchanged. In overseas markets, Trump's policy stance has been unpredictable, and there are still many variables from attitude to policy implementation. The shadow of the tariff war continues to loom over the capital markets, and the huge uncertainty continues to have a negative impact on market trends. On the fundamentals, the cost side of the aluminum industry remains stable, and the demand side is at an important juncture of alternating off-peak and peak seasons. However, except for the aluminum wire and cable sector, which bucked the trend and increased operating rates, downstream sectors performed poorly in the week before the holiday. Entering May, downstream aluminum orders are expected to continue to decline. Mainly driven by pre-holiday restocking demand, domestic aluminum ingot destocking accelerated again at the end of April, approaching the 600,000 mt mark, providing some support for pre-holiday aluminum price increases. However, this year's Labour Day holiday may see higher domestic aluminum product arrivals than the same period last year, and attention should be paid to the risk of periodic inventory buildup due to concentrated arrivals after the holiday. Coupled with an overall bearish macro outlook, domestic aluminum prices are expected to fluctuate weakly after the holiday.

【The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions cautiously and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.】