Macro fundamentals are intertwined with bullish and bearish factors, and aluminum prices are expected to fluctuate considerably [SMM Aluminum Morning Meeting Summary]

5.12 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2506 contract opened at 19,590 yuan/mt, with a high of 19,700 yuan/mt, a low of 19,555 yuan/mt, and closed at 19,655 yuan/mt, up 70 yuan/mt or 0.36% from the previous close. LME aluminum opened at $2,426/mt, with a high of $2,439/mt, a low of $2,423/mt, and closed at $2,430.0/mt, up $12.0/mt or 0.50%.

Macro: (1) The high-level China-US economic and trade talks were held in Geneva, Switzerland, from May 10 to 11. The talks were frank, in-depth, and constructive, with important consensus reached and substantive progress made. Both sides agreed to establish a China-US economic and trade consultation mechanism. China and the US will finalize relevant details as soon as possible and release a joint statement on the talks on May 12. (Bullish ★★) (2) On May 8, 2025, US President Trump and UK Prime Minister Starmer announced the conclusion of a bilateral trade agreement. The US will eliminate the 25% tariff on British steel and aluminum products and reduce the import tariff on British cars from 27.5% to 10%. (Bullish ★) (3) US Commerce Secretary Luttig stated that the base tariff rate of 10% on imports from other countries is likely to "persist in the foreseeable future." (Bearish ★) (4) Beijing released the "2025 Beijing Housing Development Annual Plan," adhering to the principle of supply based on demand, allocating 240 to 300 hectares of land for commercial housing, prioritizing development in areas with relatively complete facilities such as around rail stations, and creating vibrant centers integrating work, residence, and commerce. A total of 475 hectares of land will be allocated for various types of affordable housing. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of May 12, the domestic aluminum social inventory was 601,000 mt, a destocking of 19,000 mt from the previous Thursday. (2) In April, passenger vehicle production and retail sales reached 2.23 million units and 1.755 million units, respectively, up 11.2% and 14.5% YoY. Among them, NEV production and retail sales reached 1.151 million units and 905,000 units, respectively, up 40.3% and 33.9% YoY. (Bullish ★) (3) According to the latest data from the General Administration of Customs, in April this year, China's exports of unwrought aluminum and aluminum semis reached 518,000 mt, with a cumulative export volume of 1.883 million mt from January to April, down 5.7% YoY. (Bearish ★)

Primary Aluminum Market: On Friday, the SHFE aluminum market traded sideways in the morning session, with the price center pulling back during the session. The closing price in the first trading period was 19,610 yuan/mt. In the spot market, the price decline stimulated downstream purchasing sentiment, with the discount narrowing in the east China and Gongyi markets. In particular, spot prices in the Gongyi market continued to rise, narrowing the price spread with east China to zero.Specifically, trading sentiment in east China was moderate, with some traders reporting an increase in shipments. The market generally stood firm on quotes, and transactions were not as smooth as those on last Thursday. In the morning, transactions in the east China market were concentrated at prices of SMM + 10 yuan/mt, with some brands trading at SMM + 20 yuan/mt. Today, SMM A00 aluminum was quoted at 19,610 yuan/mt, down 10 yuan/mt from the previous trading day, trading on par with the 05 contract, narrowing by 10 yuan/mt from the previous trading day. In the central China market, shipments increased, but supply was tight. Suppliers stood firm on quotes, and transactions were concentrated at prices of SMM central China + 20 and + 30 yuan/mt. SMM central China A00 aluminum was recorded at 19,610 yuan/mt against the SHFE aluminum 2505 contract, up 10 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was 0 yuan/mt, narrowing by 20 yuan/mt from the previous trading day, trading on par with the 2505 contract. With the narrowing of the price spread between Henan and Shanghai, some supply may enter the Gongyi market. Subsequent attention should be paid to the inhibitory effect of increased supply on premiums and discounts.

Secondary aluminum raw materials: Overall aluminum scrap prices remained unchanged. After the Labour Day holiday, the operating rate of the secondary aluminum industry declined overall. Orders from downstream processing enterprises were sluggish, and purchases were mainly based on immediate needs. Last Friday, baled UBC aluminum scrap was concentratedly quoted at 14,800-15,400 yuan/mt (tax excluded), while shredded aluminum tense scrap was concentratedly quoted at 15,650-17,150 yuan/mt (tax excluded). By region, quotes in Hunan, Foshan, Hubei, and other places remained unchanged. In Jiangxi, wrought aluminum alloy scrap prices increased by 100-200 yuan/mt overall. Prices in other regions, such as Shanghai, Jiangsu, and Henan, followed A00 aluminum with minor adjustments, with price adjustments ranging from 10-30 yuan/mt. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between mechanical casting aluminum scrap and A00 aluminum in Shanghai was recorded at 1,871 yuan/mt. The price difference between aluminum extrusion scrap and A00 aluminum in Foshan was recorded at 1,386 yuan/mt, with the price spread between A00 aluminum and aluminum scrap narrowing slightly in the short term. In the short term, the aluminum scrap market is likely to maintain a pattern of fluctuating at highs. However, if primary aluminum experiences strong fluctuations due to macro factors (such as US Fed policies, geopolitical conflicts), or if domestic secondary aluminum enterprises collectively cut production, aluminum scrap prices may face periodic pressure.

Secondary aluminum alloy: Last Friday, the SMM A00 aluminum price decreased by 10 yuan/mt from the previous trading day to 19,610 yuan/mt. Domestic SMM ADC12 prices remained stable within the range of 20,200-20,400 yuan/mt. In the import market, overseas ADC12 quotes remained at 2,410-2,440 US dollars/mt, with the immediate loss of imported ADC12 still hovering around 600 yuan/mt. Entering May, the downstream of secondary aluminum is transitioning into the off-season, with weak market transactions. However, due to slightly tight raw material circulation, cost support for prices has strengthened. In the short term, ADC12 prices are expected to remain in the doldrums.

Summary: On the macro side, it still takes time for the transmission of domestic favorable policies. However, positive progress in the Sino-US tariff game may drive up the futures market. On the fundamental side, the de-stocking of domestic aluminum ingot inventory provides support for aluminum prices. However, expectations of subsequent demand weakness and the weakening of aluminum production costs both provide support for bears. Aluminum prices lack the momentum to break through the 20,000 yuan/mt threshold. With a mix of bullish and bearish factors, domestic aluminum prices are expected to fluctuate considerably in the short term.

[The information provided is for reference only. This article does not constitute direct advice for investment research and decision-making. Clients should make decisions cautiously and should not replace their own independent judgment with this information. Any decisions made by clients are not related to SMM.]

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