Easing of Sino-US Tariff Policies Stimulates Uptick in Aluminum Price Center [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on May 13

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2506 contract opened at 20,050 yuan/mt, with a high of 20,120 yuan/mt, a low of 19,925 yuan/mt, and closed at 19,935 yuan/mt, up 25 yuan/mt or 0.13% from the previous close. LME aluminum opened at $2,426/mt, with a high of $2,495/mt, a low of $2,420/mt, and closed at $2,470/mt, up $52/mt or 2.15%.

Macro: (1) Joint Statement on China-US Economic and Trade Talks in Geneva: China will reduce tariffs on US goods from 125% to 10% for 90 days; the US will reduce tariffs on Chinese goods from 145% to 30% for 90 days. (Bullish ★★) (2) Five departments: Increase support for the marine industry, commercial aerospace, and fully autonomous industries in Nansha, Guangzhou. (Bullish ★)

Fundamentals: (1) According to SMM, starting from May 13, a large alumina refinery in Shandong adjusted the purchase price of 32% ionic membrane liquid caustic soda, increasing it by 20 yuan/mt from the base price of 725 yuan/mt. The ex-factory price under the two-invoice system will be 745 yuan/mt (approximately 2,328 yuan/mt converted to 100% concentration). (Bullish ★) (2) According to SMM statistics, during the period from May 7 to May 11, the total outflows of aluminum ingots from warehouses in China were 118,200 mt, an increase of 19,200 mt from the previous period. (Bullish ★) (3) According to SMM statistics, on May 12, the inventory of aluminum billets in major domestic consumption areas was 152,700 mt, a decrease of 4,800 mt from the previous Thursday. (Bullish ★)

Primary Aluminum Market: Yesterday morning, the center of SHFE aluminum prices shifted upwards, breaking through 19,800 yuan/mt and heading straight above 19,900 yuan/mt. In the spot market, downstream enterprises in east China showed weak purchasing sentiment due to the absolute price increase, while suppliers were more active in selling, putting pressure on spot premiums. The market mainly traded at parity with SMM prices. Yesterday, SMM A00 aluminum closed at 19,810 yuan/mt, up 200 yuan/mt from the previous trading day, at parity with the May contract, unchanged from the previous trading day. In the central China market, inventory continued to decline, and suppliers had strong sentiment to stand firm on quotes. However, after the aluminum price center shifted upwards, market demand decreased. Spot premiums in central China were reported high but trended lower during the day, trading at parity to a premium of 10 yuan/mt with SMM central China transactions. SMM central China A00 aluminum was recorded at 19,810 yuan/mt against the SHFE aluminum 2505 contract, up 200 yuan/mt from the previous trading day, with a price spread of 0 yuan/mt between Henan and Shanghai, and at parity with the 2505 contract. The price spread between Shanghai and Henan narrowed, and some supplies may enter the Gongyi market. Subsequent attention should be paid to the inhibitory effect of increased supplies on premiums and discounts.

Secondary Aluminum Raw Materials: The spot price of primary aluminum increased by 200 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 19,810 yuan/mt. The overall price in the aluminum scrap market increased. As we entered the mid-to-late May period, with the transition between the off-season and peak season, downstream processing enterprises faced weak order releases, and purchases were mainly based on immediate needs.Yesterday, the centralized quoted prices for baled UBC aluminum scrap ranged from 14,850 to 15,450 yuan/mt (tax not included), while the centralized quoted prices for shredded aluminum tense scrap ranged from 15,650 to 17,150 yuan/mt (tax not included). By region, quoted prices in Hunan, Hubei, Anhui, Jiangxi, and other places remained unchanged. Prices in other regions, such as Shanghai, Jiangsu, and Henan, followed the increase in A00 aluminum, with price adjustments ranging from 100 to 200 yuan/mt. In the short term, the aluminum scrap market may continue to fluctuate at highs. The tight supply situation for aluminum tense scrap products is unlikely to change, providing strong price support. Wrought aluminum alloy products will still be dominated by fluctuations in primary aluminum, with narrow adjustments expected. Subsequently, attention should be paid to macro risks such as a policy shift by the US Fed, geopolitical conflicts, etc., which may trigger sharp fluctuations in primary aluminum, or to the impact of concentrated production cuts by domestic secondary aluminum enterprises, which may put pressure on aluminum scrap prices.

Secondary Aluminum Alloy: Yesterday, the SMM A00 aluminum price increased by 200 yuan/mt from the previous trading day to 19,810 yuan/mt, while the domestic SMM ADC12 price remained stable within the range of 20,200 to 20,400 yuan/mt. In the import market, overseas ADC12 quoted prices decreased to $2,400-2,420/mt, and the immediate loss for imported ADC12 narrowed to around 500 yuan/mt. With the expansion of aluminum price increases yesterday, secondary aluminum smelters lacked the momentum to follow the rise, and most manufacturers maintained stable quoted prices. Currently, the downstream of secondary aluminum continues to transition 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 will still maintain a pattern of weakness and fluctuation.

Summary: On the macro side, domestic favorable policies remain unchanged, and positive progress has been made in the Sino-US tariff game, which may drive up futures prices. On the fundamental side, the reduction in domestic aluminum ingot inventory provides support for aluminum prices. Subsequently, the rush to meet deadlines during the Sino-US tariff window period may continue to boost consumption, supporting an upward trend in aluminum prices. It is expected that domestic aluminum prices will mainly fluctuate upward in the short term.

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

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