The aluminum market is experiencing a volatile trend with mixed long and short positions, awaiting verification of inventory and demand [SMM Aluminum Morning Meeting Summary]

5.23 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2507 contract opened at 20,150 yuan/mt, with a high of 20,175 yuan/mt, a low of 20,115 yuan/mt, and closed at 20,160 yuan/mt, down 50 yuan/mt or 0.25% from the previous close. On Thursday, LME aluminum opened at $2,460.5/mt, with a high of $2,462/mt, a low of $2,459.5/mt, and closed at $2,460.5/mt, up $4/mt or 0.16%.

Macro: (1) To maintain ample liquidity in the banking system, the People's Bank of China (PBOC) conducted a 500 billion yuan Medium-term Lending Facility (MLF) operation on May 23, 2025 (Friday) through fixed-quantity, rate-based tendering with multiple-price awards, with a one-year tenor. (Bullish ★) (2) Initial jobless claims in the US for the week ending May 17 were recorded at 227,000, the lowest since the week ending April 19, compared to the market expectation of 230,000. (Bearish ★)

Fundamentals: (1) According to SMM statistics, as of May 22, the inventory of aluminum ingots at major domestic consumption hubs was 557,000 mt, down 28,000 mt from Monday this week and 24,000 mt from Thursday last week. With domestic transportation remaining smooth in May and expectations of weaker outflows during the off-season, liquidity at major domestic consumption hubs may gradually ease from late May to early June. However, the volume of aluminum ingots in transit domestically remained relatively low over the past two weeks, with expectations of continued destocking next week. Whether the actual inventory performance will deviate from expectations in the future will be a critical phase over the next two weeks. (Bullish ★) (2) According to SMM statistics, as of May 22, the inventory of aluminum billets at major domestic consumption hubs was 130,800 mt, down 7,400 mt from Thursday last week, with inventory firmly holding at a low level compared to the same period in the past three years. (Bullish ★) (3) According to an SMM survey, the operating rate of leading domestic aluminum downstream processing enterprises fell by 0.2 percentage points WoW to 61.4% this week. (Bearish ★)

Primary Aluminum Market: Yesterday, the SHFE aluminum market traded in a volatile manner during the morning session, with the price center moving higher. In the spot market, destocking exceeded expectations, providing support for local spot premiums. Downstream purchase willingness declined amid high aluminum prices, while trading volume among traders increased. Specifically, trading sentiment was good in east China today, with limited arrivals providing strong support for prices. Downstream purchase willingness weakened, but traders were reluctant to budge on prices amid low inventory levels. Due to limited supply, suppliers were cautious in selling, with market transactions mainly centered around SMM+10, and some at +20. Yesterday, SMM A00 aluminum was reported at 20,360 yuan/mt, up 50 yuan/mt from the previous trading day, with a premium of 80 yuan/mt against the 06 contract, up 10 yuan/mt from the previous trading day. In the central China market, transactions were concentrated around the SMM central China average price yesterday, with morning quotes fluctuating significantly. SMM Central China A00 recorded 20,290 yuan/mt against the SHFE aluminum 2506 contract, up 50 yuan/mt from the previous trading day. The price spread between Henan and Shanghai stood at 70 yuan/mt, unchanged from the previous trading day, with a premium of 10 yuan/mt against the 2506 contract.

Secondary aluminum raw materials: Spot primary aluminum prices rose by 50 yuan/mt compared to the previous trading day, with SMM A00 spot closing at 20,360 yuan/mt. Aluminum scrap prices fluctuated at highs. Entering late May, downstream processing enterprises saw weak order releases, with procurement mainly driven by rigid demand. Yesterday, baled UBC aluminum scrap was quoted at 15,300-15,900 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 15,800-17,300 yuan/mt (excluding tax). In terms of the price difference between A00 aluminum and aluminum scrap, the price difference for mechanical casting aluminum scrap in Shanghai increased by 8 yuan/mt to 1,861 yuan/mt, while the price difference for aluminum extrusion scrap in Foshan continued to rise by 40 yuan/mt to 1,533 yuan/mt. In the short term, the aluminum scrap market is expected to continue fluctuating at highs, with the tight supply of aluminum tense scrap products remaining unchanged, providing strong price support. Wrought aluminum alloy products will still be dominated by primary aluminum fluctuations, with narrow adjustments expected.

Secondary aluminum alloy: Aluminum prices continued to rise slightly yesterday, but due to the deepening off-season in end-use demand, secondary aluminum plants lacked the momentum to follow the increase. Domestic SMM ADC12 prices remained in the range of 20,300-20,500 yuan/mt. In the short term, secondary aluminum alloy prices are expected to maintain a narrow rangebound fluctuation pattern, with weak demand continuing to constrain upside room, although cost support remains. Subsequent focus will be on tracking raw material supply, changes in orders, and the progress of production cuts by secondary aluminum enterprises.

Summary: On the macro front, the US dollar index rose 0.33% overnight, closing at 99.94. The US House of Representatives passed President Trump's large-scale tax and spending cut bill. On Thursday, US Fed Governor Christopher Waller stated that if the Trump administration maintains tariffs on US trading partners at around 10%, the Fed may begin cutting interest rates in H2 2025. On the fundamentals side, short-term supply-side changes are relatively small. On the cost side, the specific impact of the Guinea incident on local bauxite supply remains to be assessed, but it may provide emotional support to alumina costs in the short term. The demand side faces dual pressures of domestic seasonal weakness and trade uncertainty. In the short term, the operating rate of aluminum processing enterprises continues to decline under pressure. Subsequent attention will be on whether downstream export orders can truly improve and offset the weakening expectations of domestic demand. Overall, current low inventory provides support for aluminum prices, but the lack of macro-driven positive factors to further push prices, coupled with off-season pressure on the demand side, limits upside room. Spot aluminum ingot in mainstream consumption areas will face a weak supply and demand situation. In the short term, aluminum prices are expected to maintain rangebound consolidation, with focus on domestic and overseas demand performance, inventory trends by the end of May, and bauxite supply disruptions.

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

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