Macro fundamentals are intertwined with bullish and bearish factors, and aluminum prices will maintain a fluctuating and consolidating trend in the short term [SMM Aluminum Morning Meeting Summary]

5.3 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2507 contract opened at 20,165 yuan/mt, with a high of 20,175 yuan/mt, a low of 20,095 yuan/mt, and closed at 20,110 yuan/mt, down 90 yuan/mt or 0.45% from the previous close. LME aluminum opened at $2,450/mt yesterday, with a high of $2,452/mt, a low of $2,448/mt, and closed at $2,450/mt, down $0.5/mt or 0.02%.

Macro: (1) The US federal appeals court approved the Trump administration's request on the 29th to temporarily suspend a previous ruling by a lower court that had prohibited the enforcement of multiple tariff executive orders issued by the US government. (Bullish ★) (2) The US GDP for Q1 was revised to a 0.2% annualized decline, dragged down by weak spending and trade impacts. (Bearish ★) (3) Trump met with Fed Chairman Powell at the White House on Thursday, urging him to cut interest rates in person. Powell emphasized that the policy path would entirely depend on economic data and its implications for the economic outlook. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of May 29, the inventory of aluminum ingots in major domestic consumption areas stood at 511,000 mt, down 23,000 mt from Monday and 46,000 mt WoW. (Bullish ★) (2) According to SMM statistics, as of May 29, the inventory of aluminum billets in major domestic consumption areas was 128,300 mt, down 1,900 mt from Monday. (Bullish ★) (3) According to SMM data, as of Thursday this week, the total installed capacity of metallurgical-grade alumina in China was 110.82 million mt/year, with a total operating capacity of 86.67 million mt/year. The national alumina weekly operating rate rose 0.19 percentage points WoW to 78.21%, mainly due to the end of maintenance at some enterprises and the subsequent increase in operating capacity. (Bearish ★)

Primary Aluminum Market: After aluminum prices surged continuously to 20,300 yuan/mt in the morning session on Thursday, they pulled back under pressure. In east China, due to the recent continuous destocking, suppliers generally showed strong reluctance to budge on prices. Currently, it is expected that the volume of in-transit cargoes in east China will remain low in the subsequent period, coupled with continuous purchases by major buyers in the market, leading to a continuous rise in premiums. The market has seen transactions at a premium of 10 yuan/mt against the SMM average price. On Thursday, SMM A00 aluminum was reported at 20,380 yuan/mt, up 30 yuan/mt from the previous trading day, with a premium of 110 yuan/mt against the 06 contract, up 10 yuan/mt from the previous trading day. In the central China market, suppliers rushed to sell in the morning session, pushing the spot market into a discount. As aluminum prices continued to rebound, the market worried about further price surges and began to replenish stocks. Overall, consumption in central China showed a weakening trend, with downstream purchasing power slowing down. However, the volume of in-transit cargoes in the market also declined WoW, resulting in a situation of weak supply and demand. There were slight differences between buyers and sellers, and premiums remained stagnant. The SMM central China A00 aluminum price against the SHFE aluminum 2506 contract was recorded at 20,310 yuan/mt, up 30 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -70 yuan/mt, unchanged from the previous trading day. It was trading at a premium of 40 yuan/mt against the 2506 contract, up 10 yuan/mt.

Secondary aluminum raw materials: On Thursday, spot primary aluminum prices rose by 30 yuan/mt from the previous trading day. The SMM A00 spot aluminum closed at 20,380 yuan/mt. Aluminum scrap market prices were generally flat with the previous day but remained at highs overall. With the off-season in June approaching, downstream processing enterprises struggled to release orders, and procurement was mainly driven by immediate needs. On Thursday, the centralized quotes for baled UBC aluminum scrap ranged from 15,250 to 15,850 yuan/mt (tax-exclusive), while shredded aluminum tense scrap was quoted at 15,700-17,200 yuan/mt (tax-exclusive). Regionally, aluminum prices in Shanghai, Jiangsu, Henan, Shandong, and other regions were closely linked, with price adjustments ranging from 0 to 50 yuan/mt. In Jiangxi, Hunan, Hubei, Anhui, and other regions, prices remained unchanged from the previous day. According to the SMM survey, regarding the implementation progress of "reverse invoicing," Anhui, Henan, Hubei, and other regions have continued to increase their efforts in implementing invoicing. Traders in these regions have once again adopted a wait-and-see attitude towards subsequent prices. In the short term, aluminum scrap market prices are expected to continue fluctuating at highs. The tight supply of aluminum tense scrap is unlikely to change, providing solid price support. Wrought aluminum alloy scrap will continue to fluctuate rangebound with primary aluminum, but the risk of a high-level correction in primary aluminum prices, coupled with weak demand during the off-season, will limit upside room. For downstream enterprises using aluminum scrap, the ongoing tug-of-war between cost pressure and weak end-user orders may keep operating rates low. Narrowing import losses may partially alleviate supply pressure, but the transmission effect will be limited. Regional and product price spreads may further diverge. Tight supply in South China and other regions may support localized price increases, while prices in regions with weak demand will face downward pressure.

Secondary aluminum alloy: On Thursday, the SMM A00 aluminum price rebounded by 30 yuan/mt from the previous trading day to 20,380 yuan/mt. The secondary aluminum market still struggled to catch up, with domestic SMM ADC12 prices holding steady in the range of 20,200-20,400 yuan/mt. In the import market, the CIF quotes for imported ADC12 continued to range from 2,380 to 2,400 US dollars/mt, with imports maintaining a slight loss on a spot basis. Local ADC12 prices in Thailand (tax-exclusive) were concentrated at 82 Thai baht/kg. As the Dragon Boat Festival holiday approaches, downstream inventory stockpiling sentiment is low, with limited demand-driving effects. Secondary aluminum smelters may operate normally or take a 1-2 day holiday during the Dragon Boat Festival, with a slight decrease in the overall industry operating rate. In the short term, secondary aluminum alloy prices are expected to remain rangebound. Weak demand will constrain upside room for prices, but cost support will persist. Subsequent focus should be on tracking changes in raw material supply, order volumes, and production cut progress at secondary aluminum enterprises.

Summary: Domestically, the favorable macroeconomic atmosphere remains unchanged, while overseas macroeconomic uncertainties persist. Fundamentals side, the overall supply side of the short-term aluminum market has remained stable, with no significant changes observed. On the cost side, the price fluctuations caused by earlier supply disruptions of bauxite from Guinea have gradually eased, and the growth rate of domestic spot alumina prices has slowed down significantly. As the profit margins of alumina enterprises have improved, some enterprises are expected to initiate production resumption plans, which may have a certain impact on the subsequent market supply. Despite expectations of weakening demand in some industries during the off-season, the overall decline has been better than anticipated, and demand resilience remains. Overall, the unexpected reduction in domestic aluminum ingot inventory has provided support for aluminum prices and spot premiums. However, due to the recent lack of unexpectedly positive macro factors, it is difficult for aluminum prices to rise further. Meanwhile, the off-season pressure on the demand side has also limited the upside room for aluminum prices to a certain extent. Therefore, it is expected that aluminum prices will maintain a fluctuating rangebound consolidation trend in the short term.

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

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