US import tariffs on steel and aluminum escalate and take effect, with SHFE aluminum likely to be mildly strong [SMM Aluminum Morning Meeting Summary]

June 4 SMM Aluminum Morning Meeting Minutes

Futures market: Last night, the most-traded SHFE aluminum 2507 contract opened at 19,990 yuan/mt, hitting a high of 20,005 yuan/mt and a low of 19,890 yuan/mt, before closing at 19,990 yuan/mt. Trading volume stood at 63,000 lots, with open interest at 191,000 lots. LME aluminum opened at $2,470.5/mt, reached a high of $2,479/mt and a low of $2,469.5/mt, then settled at $2,474.5/mt.

Macro: (1) US President Trump announced raising tariffs on imported steel, aluminum and related products from 25% to 50%, effective at 00:01 EST on June 4, 2025. Tariffs on steel and aluminum imports from the UK will remain at 25%. (Bearish★) (2) With only five weeks left until the July 8 tariff restoration deadline, the Trump administration sent urgent letters demanding countries submit their best trade negotiation proposals by June 4. This move revealed Washington's anxiety under self-imposed deadline pressure and introduced new uncertainties to global markets. (Neutral★)

Fundamentals: (1) SMM data showed China's primary aluminum ingot inventories in major consumption areas totaled 519,000 mt on June 3, up 8,000 mt WoW. Post-holiday inventory buildup remained generally controllable, with Gongyi seeing notable accumulation due to concentrated end-month shipments. Foshan maintained weak supply-demand dynamics with minor post-holiday declines. Wuxi recorded slight holiday accumulation, but subsequent shipments from smelters are expected to stay limited, keeping arrivals tight. (Bullish★) (2) SMM statistics indicated aluminum billet inventories in major consumption areas stood at 127,700 mt on June 3, down 600 mt WoW. (Bullish★)

Primary aluminum market: SHFE aluminum fell rapidly in early trading yesterday, pressured by tariff hikes and post-holiday social inventory buildup. Bears increased positions. Spot market performance varied, with east China showing moderate activity while central China fared better. Specifically, east China saw cautious trading as merchants offloaded cargoes amid market concerns. Early transactions occurred at SMM+10 to average price, later shifting to average price to small discounts, with most deals settling at SMM average to -10. SMM A00 aluminum was quoted at 20,120 yuan/mt yesterday, down 170 yuan/mt from the previous session, at a premium of 110 yuan/mt against the June contract, unchanged. Central China showed slight improvement, with transactions concentrated at SMM central China average +10. SMM central China A00 aluminum was recorded at 20,070 yuan/mt against the SHFE 2506 contract, down 160 yuan/mt, with the Henan-Shanghai price spread at 50 yuan/mt (flat) and a premium of 60 against the 2506 contract.

 Secondary Aluminum Raw Materials: Yesterday, spot primary aluminum prices fell by 170 yuan/mt compared to the previous trading day, with SMM A00 spot aluminum closing at 20,120 yuan/mt. Aluminum scrap market prices adjusted downward overall, with varying price adjustments in different regions for some products. As the off-season in June began, downstream scrap utilization enterprises faced weak order releases, with procurement mainly driven by immediate needs. Yesterday, the quoted prices for baled UBC aluminum scrap were concentrated in the range of 15,000-15,600 yuan/mt (tax-exclusive), while shredded aluminum tense scrap prices were concentrated in the range of 15,500-17,000 yuan/mt (tax-exclusive). By region, Shanghai, Jiangxi, Jiangsu, Henan, Shandong, and other places closely tracked aluminum prices, with price adjustments ranging from 100-150 yuan/mt. In Guizhou and Foshan, prices remained relatively firm, with price adjustments lagging behind aluminum prices, ranging from 50-100 yuan/mt. By product, prices for baled UBC aluminum scrap generally retreated, with single-day decreases of 250 yuan/mt in Sichuan, Chongqing, Shanghai, and Zhejiang, and 100 yuan/mt in Henan, Jiangxi, Hunan, and Foshan. For shredded aluminum tense scrap, overall quoted prices decreased by 100-150 yuan/mt. In the short term, aluminum scrap market prices are expected to continue fluctuating at highs, with a tight supply of aluminum tense scrap maintaining firm price support. Wrought aluminum alloy scrap continues to fluctuate rangebound with primary aluminum, but the accumulation of risks associated with a high-level correction in primary aluminum prices, combined with weak demand during the off-season, limits upside room. For downstream scrap-using enterprises, cost pressures and weak terminal orders continue to compete, with operating rates likely to remain low. Narrowing import losses may partially alleviate supply pressures, but the transmission effect is limited. Regional and product price differentials may further diverge, with tight supplies in South China and other regions potentially supporting localized price increases, while prices in regions with weak demand face downward pressure.

Secondary Aluminum Alloy: Yesterday, SMM A00 aluminum prices fell by 170 yuan/mt compared to the previous trading day to 20,120 yuan/mt, with the secondary aluminum market continuing to follow the decline. Domestic SMM ADC12 prices decreased by 100 yuan/mt to the range of 20,000-20,200 yuan/mt. In the import market, CIF quotes for imported ADC12 remained relatively firm, continuing to range from 2,380-2,400 US dollars/mt. As domestic prices continued to decline, immediate import losses slightly expanded to around 400 yuan/mt. Local ADC12 tax-exclusive quotes in Thailand fell to 81.5 Thai baht/kg. Entering the traditional consumption off-season in June, the overall atmosphere in the secondary aluminum market remains weak. Downstream procurement demand is sluggish, with insufficient new orders from enterprises, leading to cautious market sentiment and low trading activity. Against this backdrop, secondary aluminum alloy prices exhibit a clear characteristic of "following declines but not increases." Overall, in the absence of substantial improvement in end-use demand, secondary aluminum alloy prices are expected to continue in a weak and fluctuating pattern in the short term.

Summary: Although the increase in US steel and aluminum tariffs to 50% is negative, China's direct aluminum semis exports to the US have already been restricted by high tariffs for many years, with limited actual incremental impact. The main effect is on overall market sentiment, suppressing global aluminum trade liquidity, particularly impacting countries highly dependent on US exports, and exacerbating regional supply surplus pressures in the short term. Fundamentally, domestic aluminum operating capacity remained stable. Notably, some aluminum smelters in north China increased the proportion of liquid aluminum alloying, reducing casting ingot volumes, which affected arrivals in major consumption areas. Demand side, downstream sectors showed signs of off-season expectations, with PV aluminum demand declining and automotive material demand expected to weaken in mid-to-late June. Construction aluminum demand remained lackluster, but aluminum wire and cable operating rates stayed high due to orders from State Grid. Inventory side, approaching the holiday, some aluminum processing enterprises conducted mild stockpiling based on orders on hand. Overall, short-term market sentiment may be impacted by tariff pressures, suppressing aluminum prices. Meanwhile, domestic aluminum ingot inventory drew down more than expected, supporting aluminum prices and spot premiums. Some industries already exhibited signs of off-season weakness, but the overall decline was better than expected, with demand resilience remaining. SHFE aluminum is expected to maintain a fluctuating trend in the short term, with solid support at lower levels. If macro pressures do not escalate significantly, prices may show mild upward potential.

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

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