Continued destocking in fundamentals and favourable macro front drive aluminium prices to fluctuate upward [SMM Aluminium Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on May 15

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2506 contract opened at 20,300 yuan/mt, with a high of 20,315 yuan/mt, a low of 20,245 yuan/mt, and closed at 20,295 yuan/mt, up 20 yuan/mt or 0.10% from the previous close. LME aluminum opened at $2,490/mt, with a high of $2,543.5/mt, a low of $2,486/mt, and closed at $2,522.5/mt, up $29.0/mt or 1.16%.

Macro: (1) China and Colombia signed a cooperation plan for jointly building the Belt and Road Initiative and announced the signing of documents on exchanges and cooperation in the field of economic development. (Bullish ★) (2) According to the "Executive Order on Modifying Reciprocal Tariff Rates to Reflect Talks with the People's Republic of China" issued by the US White House on May 12, starting from May 14 Eastern Time, the US will revoke 91% of tariffs on China and adjust 34% of reciprocal tariffs (24% suspended for 90 days, with 10% retained). Meanwhile, the US will also reduce or revoke additional tariffs imposed on small parcels from China (including those from the Hong Kong Special Administrative Region), lowering the ad valorem tariff rate for international mail from 120% to 54% and revoking the measure originally scheduled to increase the specific tariff from $100 to $200 per item starting from June 1, 2025. (Bullish ★★) (3) China's countermeasures against the US's fentanyl tariffs remain in effect. (Bearish ★)

Fundamentals: (1) According to SMM statistics, as of May 14, the aluminum ingot inventory in Guangdong was 237,000 mt; in Wuxi, it was 174,000 mt; and in Gongyi, it was 60,400 mt. The total inventory in these three regions was 471,400 mt, a decrease of 8,000 mt from the previous trading day. (Bullish ★) (2) According to SMM statistics, regarding the inventory of aluminum billet in two domestic regions, the aluminum billet inventory in Guangdong was 77,300 mt, and in Wuxi, it was 15,200 mt, totaling 92,500 mt, a decrease of 3,700 mt WoW. (Bullish ★) (3) Emirates Global Aluminium (EGA), a global aluminum company in the UAE, announced that the construction of the country's largest aluminum recycling plant has reached 50% completion, 42 days ahead of the original schedule. (Neutral)

Primary Aluminum Market: Yesterday morning, the center of SHFE aluminum prices continued to move upward, stabilizing above 20,000 yuan/mt. In east China, due to the recent de-stocking trend and low expectations for subsequent arrivals, suppliers generally had a strong sentiment to stand firm on quotes. The market mainly saw spot premiums of 5-10 yuan/mt against SMM transactions. Yesterday, SMM A00 aluminum was reported at 20,210 yuan/mt, up 200 yuan/mt from the previous trading day, with a premium of 20 yuan/mt against the May contract. In the central China market, inventory continued to decline, and suppliers had a strong sentiment to stand firm on quotes. However, after the center of aluminum prices moved upward, market demand decreased. In the central China region, spot cargoes started the day at a discount, with spot premiums suffering a price collapse, trading at a discount of 10-20 yuan/mt against SMM transactions in central China. SMM recorded the price of A00 aluminum in central China against the SHFE aluminum 2505 contract at 20,180 yuan/mt, up 180 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -30 yuan/mt, with a discount of 10 yuan/mt against the 2505 contract.

Secondary aluminum raw materials: Yesterday, spot primary aluminum prices rose by 200 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,210 yuan/mt. Overall aluminum scrap prices increased in the market. As we entered the mid-to-late May period, marking the transition between the off-season and peak season, downstream processing enterprises experienced weak order releases, with procurement mainly driven by immediate needs. Yesterday, the concentrated quotes for baled UBC aluminum scrap ranged from 15,200-15,800 yuan/mt (tax not included), while the concentrated quotes for shredded aluminum tense scrap ranged from 15,850-17,350 yuan/mt (tax not included). Regionally, price adjustments in Anhui, Foshan, Jiangxi, and other areas ranged from 100-150 yuan/mt, lagging behind the adjustments in primary aluminum. In other regions, such as Shanghai, Jiangsu, and Henan, price adjustments ranged from 150-200 yuan/mt, closely following aluminum price movements. 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 scrap products will still be dominated by fluctuations in primary aluminum, with narrow adjustments expected. Overall, during the transition period between the off-season and peak season, with weak supply and demand in the market, the differentiation between varieties and regional price differences may become more pronounced. Subsequent attention should be paid to macro risks such as a potential shift in the US Fed's policy, geopolitical conflicts, which could trigger sharp fluctuations in primary aluminum, or concentrated production cuts by domestic secondary aluminum enterprises, which could put pressure on aluminum scrap prices.

Secondary aluminum alloy: Yesterday, the SMM A00 aluminum price rose by another 200 yuan/mt from the previous trading day to 20,210 yuan/mt. Secondary aluminum smelters generally followed the increase, with the SMM ADC12 price rising by 100 yuan/mt to the range of 20,300-20,500 yuan/mt. Currently, downstream demand is in the transition period of the off-season, with transactions continuing to be sluggish. Although tariff easing brings hope for downstream order growth, it will take time for the market to transmit to the production side, and the effect of boosting consumption is unlikely to be immediately apparent. Additionally, due to tight raw material circulation and traders' reluctance to sell, cost support continues to strengthen. It is expected that the ADC12 price will maintain a fluctuating rangebound trend in the short term.

Summary: On the macro side, domestic favorable policies remain unchanged, and positive progress in the Sino-US tariff negotiations may drive up futures prices. On the fundamental side, the continuous inventory drawdown of domestic aluminum ingots provides support for aluminum prices. Subsequent rush to meet deadlines during the Sino-US tariff window period may continue to boost consumption, providing support for aluminum prices to rise. 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 not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]

》Click to view the SMM aluminum industry chain database

》Subscribe to view the historical spot prices of SMM metals