Macro uncertainties remain, low inventory supports aluminum prices [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on May 27

Futures Market: Overnight, the most-traded SHFE aluminum 2507 contract opened at 20,150 yuan/mt, with a high of 20,185 yuan/mt and a low of 20,090 yuan/mt, closing at 20,170 yuan/mt, up 15 yuan/mt or 0.07% from the previous close. LME aluminum was closed on Monday due to a holiday.

Macro: (1) The EU stated that it had agreed to accelerate negotiations with the US to avoid a transatlantic trade war. EU Trade Commissioner Sefcovic said he had a "good call" with US Commerce Secretary Raimondo and Trade Representative Tai. (Neutral ★) (2) German Chancellor Merz said on the 26th local time that US tariff hikes would harm German interests. If negotiations between Europe and the US fail to reach an agreement, Germany would have no choice but to retaliate against US tariff policies. (Bearish ★)

Fundamentals: (1) According to SMM statistics, as of May 26, the inventory of aluminum ingots in major domestic consumption areas stood at 534,000 mt, down 23,000 mt from the previous Thursday and 51,000 mt WoW. (Bullish ★) (2) According to SMM statistics, as of May 26, the inventory of aluminum billets in major domestic consumption areas was 130,200 mt, down 600 mt from the previous Thursday. (Bullish ★)

Primary Aluminum Market: On Monday morning, the center of the front-month SHFE aluminum contract continued to rise to around 20,250 yuan/mt, fluctuating rangebound. In east China, due to the recent inventory drawdown, suppliers generally showed strong reluctance to budge on prices. However, downstream buying interest weakened overall, with the market trading at a premium of 10 yuan/mt against SMM's spot aluminum, and the trading trend gradually turning sluggish. On Monday, SMM A00 aluminum closed at 20,350 yuan/mt, down 20 yuan/mt from the previous trading day, with a premium of 90 yuan/mt against the 06 contract, up 10 yuan/mt from the previous trading day. In the central China market, suppliers held firm at a premium of around 10 yuan/mt in the morning session. However, as shipments increased but buying interest weakened, market transactions slipped to a discount of 10 yuan/mt to parity against SMM's spot aluminum in central China. Currently, consumption in central China is showing a weakening trend, and spot premiums are expected to remain under pressure. SMM A00 aluminum in central China against the SHFE aluminum 2506 contract was recorded at 20,270 yuan/mt, down 30 yuan/mt from the previous trading day. The price spread between central China and east China was -80 yuan/mt, down 10 yuan/mt from the previous trading day, with a premium of 10 yuan/mt against the 2506 contract.

Secondary Aluminum Raw Materials: On Monday, spot primary aluminum prices were down 20 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,350 yuan/mt. Aluminum scrap market prices fluctuated at highs. With the off-season in June approaching, downstream processing enterprises are experiencing weak order releases, with purchases mainly driven by immediate needs. On Monday, baled UBC aluminum scrap was concentratedly quoted at 15,300-15,900 yuan/mt (tax not included), while shredded aluminum tense scrap was concentratedly quoted at 15,800-17,300 yuan/mt (tax not included). Regionally, prices remained stable in Hubei, Guizhou, Anhui, and other regions without adjustments, while areas like Shanghai, Jiangsu, Henan, and Shandong closely followed aluminum price movements with adjustments ranging from 0-50 yuan/mt. Short-term, the aluminum scrap market continues to fluctuate at highs, with tight supply of aluminum tense scrap sustaining solid price support. Wrought aluminum alloy scrap still moves rangebound with primary aluminum, but accumulated risks of a high-level pullback in primary aluminum coupled with weak off-season demand limit upside room. For downstream scrap-consuming enterprises, ongoing cost pressure and sluggish end-user orders keep operating rates likely low. Narrowed import losses may partially alleviate supply pressure, though the transmission effect remains limited. Regional and product price spreads may further diverge, with tight supply in South China potentially supporting local increases, while prices in demand-weak regions face downward pressure.

Secondary aluminum alloy: On Monday, SMM A00 aluminum prices pulled back slightly by 20 yuan/mt WoW to 20,350 yuan/mt, while domestic SMM ADC12 prices held steady at 20,300-20,500 yuan/mt. In the import market, ADC12 CIF offers mostly stood at $2,380-2,400/mt, with immediate losses narrowing to below 100 yuan due to the RMB exchange rate hitting a six-month high. Thailand’s local ADC12 ex-tax quotes remained stable at 82.5 baht/kg WoW. Short-term, secondary aluminum alloy prices are expected to fluctuate rangebound, as weak demand continues to cap upside room, though cost-side support persists. Key factors to monitor include raw material supply, order changes, and secondary aluminum production cuts.

Summary: Macro-wise, Minneapolis Fed President Kashkari noted on Monday that major shifts in US trade and immigration policies under the Trump administration’s ongoing tariff negotiations are creating uncertainty for potential Fed rate adjustments by September. Fundamentals side, short-term supply shows little change. Cost side, the specific impact of Guinea’s incident on bauxite supply awaits assessment, though it may temporarily bolster alumina cost support sentiment-wise. Demand faces dual pressures from domestic seasonal weakness and trade uncertainty, keeping aluminum processors’ operating rates under pressure. Follow-up attention should focus on whether export orders can genuinely improve to offset weakening domestic demand. Overall, current low inventory supports aluminum prices, but the absence of macro catalysts to further drive prices, combined with off-season demand constraints, keeps prices rangebound in the near term. Monitor domestic and overseas demand performance, month-end inventory trends, and bauxite supply disruptions.

[The provided information 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 use this article to replace their own independent judgment. Any decisions made by clients are not related to SMM】

》Click to view the SMM aluminum industry chain database

》Subscribe to view historical spot prices of SMM metals