Trade negotiations are still ongoing, with aluminum prices under short-term pressure and fluctuating [SMM Aluminum Morning Meeting Summary]

6.5 SMM Aluminum Morning Meeting Summary

Futures Market: Last night, the most-traded SHFE aluminum 2507 contract opened at 20,030 yuan/mt, with a high of 20,125 yuan/mt, a low of 20,025 yuan/mt, and closed at 20,110 yuan/mt. Trading volume was 43,000 lots, and open interest was 189,000 lots. Yesterday, LME aluminum opened at $2,485/mt, with a high of $2,490/mt, a low of $2,483/mt, and closed at $2,489/mt.

Macro: (1) Early this morning, the US Fed's "Beige Book" revealed that US economic activity has declined slightly since the last report. Businesses and consumers are facing increased policy uncertainty and rising price pressures, with the overall economic outlook remaining pessimistic. Tariff policies have become a key factor driving up costs. Some companies plan to raise prices in the next three months to pass on cost pressures, including adjusting profit margins, adding surcharges, or implementing across-the-board price increases. (Bearish ★) (2) It is rumored that the US-Canada agreement may be reached next week. Canadian Prime Minister: If negotiations fail, Canada is prepared to take retaliatory measures against the US. (Neutral ★)

Fundamentals: (1) According to SMM's domestic aluminum ingot inventory data from three locations, domestic primary aluminum ingot inventory was 391,500 mt on June 4, a destocking of 10,500 mt from the previous trading day. (2) According to SMM's statistics on domestic aluminum billet inventory at two locations, aluminum billet inventory in Guangdong was 60,600 mt, and aluminum billet inventory in Wuxi was 19,500 mt, totaling 80,100 mt, up 1,000 mt MoM. (Bearish ★) (3) According to SMM's statistics, the combined social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi on June 4 was 14,830 mt, an increase of 269 mt from the previous trading day. (Bearish)

Primary Aluminum Market: Yesterday, SHFE aluminum fluctuated upward in the morning session. Outflows from warehouses were good in major consumption areas. In terms of spot market performance, spot aluminum in east China was generally flat, with a focus on selling. High premiums loosened somewhat, and early in the morning, transactions were concluded at -10 against the SMM average price. Yesterday, SMM A00 aluminum closed at 20,280 yuan/mt, up 160 yuan/mt from the previous trading day, with a premium of 100 against the 06 contract, narrowing by 10 yuan/mt from the previous trading day. In the central China market, premiums held steady today. Yesterday, transactions in the central China market were concentrated on selling against the SMM central China average price. SMM central China A00 aluminum was recorded at 20,230 yuan/mt against the SHFE aluminum 2506 contract, up 160 yuan/mt from the previous trading day. The price spread between central China and Shanghai was 50 yuan/mt, unchanged from the previous trading day, with a premium of 50 against the 2506 contract.

 Secondary Aluminum Raw Materials: Yesterday, spot primary aluminum rebounded by 160 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,280 yuan/mt, with aluminum scrap market prices adjusting unevenly. With the onset of the off-season in June, downstream scrap utilisation enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. Yesterday, the centralized quotes for baled UBC scrap aluminum ranged from 15,100 to 15,600 yuan/mt (tax not included), while the centralized quotes for shredded aluminum tense scrap ranged from 15,500 to 17,000 yuan/mt (tax not included). By region, Shanghai, Jiangsu, Henan, Shandong, Guizhou, and other places closely tracked aluminum prices, with price adjustments ranging from 100 to 150 yuan/mt. In Jiangxi and Foshan, price adjustments lagged behind aluminum prices, with quotes remaining unchanged from the previous day. By product, the overall price of baled UBC scrap aluminum rebounded, with single-day adjustments of 100 yuan/mt in Sichuan, Chongqing, Shanghai, and Zhejiang, while Jiangxi and Foshan chose to maintain their prices. For shredded aluminum tense scrap, the overall quotes rebounded by 100-150 yuan/mt. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai decreased by 10 yuan/mt WoW to 1,835 yuan/mt. The price difference between A00 aluminum and aluminum extrusion scrap in Foshan increased by 100 yuan/mt WoW to 1,522 yuan/mt.

Secondary aluminum alloy: Yesterday, the SMM A00 aluminum price rebounded by 160 yuan/mt from the previous trading day to 20,280 yuan/mt, while the secondary aluminum market struggled to keep up with the increase. The domestic SMM ADC12 price remained stable within the range of 20,000-20,200 yuan/mt. In the import market, the CIF quotes for imported ADC12 remained relatively firm, continuing to range from 2,380 to 2,400 US dollars/mt, with the immediate import loss hovering around 400 yuan/mt. The tax-excluded quotes for local ADC12 in Thailand stood at 81.5 Thai baht/kg. Entering the traditional consumption off-season in June, the overall atmosphere in the secondary aluminum market remained weak. Downstream procurement demand was sluggish, with insufficient new orders for enterprises and low trading activity. Additionally, coupled with inventory pressure, secondary aluminum prices exhibited a clear characteristic of "following declines but not increases." Overall, against the backdrop of no substantive recovery in end-use demand, it is expected that the price of secondary aluminum alloy will continue to exhibit a weak and volatile pattern in the short term.

Summary: The US Fed's Beige Book revealed the current situation of slowing economic activity and excessive inflationary pressures in the US. Policy uncertainty has simultaneously exacerbated market risk-averse sentiment. Enterprises, influenced by the economic environment, may choose to pass on costs, potentially suppressing end-use demand. Coupled with the risk of international trade frictions, there is a high probability of short-term pressure and volatility in aluminum prices. On the fundamentals side, the operating capacity of domestic aluminum smelters remained stable. It is worth noting that the proportion of liquid aluminum alloying increased in some aluminum smelters in north China, leading to a decrease in casting ingot volumes and affecting the arrival of goods in major consumption areas. On the demand side, some downstream sectors are showing expectations of a slowdown during the off-season. The demand for aluminum in the PV sector has decreased, and the demand for automotive materials is expected to weaken in mid-to-late June. The demand for aluminum in construction remains lukewarm, but currently, due to the demand from State Grid orders, the operating rate of aluminum wire and cable remains high. In terms of inventory, as the Dragon Boat Festival holiday approaches, some aluminum processing enterprises have slightly stockpiled based on their orders on hand. Overall, short-term market sentiment may be suppressed by tariff impacts, weighing on aluminum prices. Meanwhile, the unexpected drawdown in domestic aluminum ingot inventory provides support for aluminum prices and spot premiums. Currently, some industries are already showing expectations of a slowdown during the off-season, but the overall decline is better than expected, and demand resilience still exists. It is expected that SHFE aluminum will maintain a fluctuating trend in the short term, with relatively stable support below.

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

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