On the macro front, US President Trump announced that tariffs on imported steel, aluminum, and their derivative products would be raised from 25% to 50%, effective from 00:01 AM Eastern Time on June 4, 2025. With only five weeks remaining until the tariff restoration deadline of July 8, the Trump administration sent an urgent letter requesting countries to submit their best trade negotiation proposals by June 4. This move exposed Washington's anxiety under the pressure of self-imposed deadlines and introduced new uncertainties to the global market. The US Fed's "Beige Book" revealed that US economic activity had declined slightly since the last report, with businesses and consumers facing rising policy uncertainty and mounting price pressures, leading to a generally pessimistic outlook for the overall economy. The tariff policy emerged as a key factor driving up costs, prompting some enterprises to plan price increases over the next three months to pass on cost pressures, through methods such as adjusting profit margins, imposing surcharges, or raising prices across the board. China's manufacturing PMI in May rose by 0.5 percentage points MoM, indicating an improvement in manufacturing sector prosperity; the export container freight index rebounded, and port cargo throughput remained at a relatively high level.
Fundamentals side, the operating capacity of domestic aluminum remained stable, with expectations of a slight decrease in subsequent casting ingot volumes. On the cost side, the impact of the Guinea ore incident on alumina prices had eased, and the real-time cost of aluminum declined slightly MoM, falling by approximately 13 yuan/mt from last Thursday to 17,190 yuan/mt. On the demand side, domestic seasonal weakness and trade uncertainties exerted dual pressures, intensifying the off-season atmosphere. In the short term, the operating rates of aluminum processing enterprises would be under pressure, particularly in the extrusion sector, where orders for building materials, PV, and automotive sectors all showed varying degrees of sluggish growth. In terms of inventory, despite a slight inventory buildup during the Dragon Boat Festival holiday, overall in-transit cargo volumes in China remained low post-holiday, leading to a continued decline in mid-week inventory, approaching the 500,000 mt mark. According to SMM statistics, as of June 5, the inventory of aluminum ingots at major domestic consumption hubs stood at 504,000 mt, down 15,000 mt from the beginning of the week and 7,000 mt from last Thursday, highlighting the continued resilience of domestic consumption at the start of June and the still-low domestic supply of aluminum ingots. SMM expects that domestic aluminum ingot inventory will maintain an overall destocking trend, with a potential breakthrough below the 500,000 mt mark in the near future.
Overall, on the macro front, the escalation and implementation of US import tariffs on steel and aluminum have suppressed global aluminum trade liquidity, particularly impacting countries with high export dependence on the US, exacerbating regional supply surplus pressures in the short term. The US Fed's Beige Book revealed the current state of slowing US economic activity and overburdened inflationary pressures, with policy uncertainties simultaneously intensifying market risk-averse sentiment. Enterprises, influenced by the economic environment, choosing to pass on costs may suppress end-use demand. The rebound in China's manufacturing PMI and the improvement in export indicators in May provided demand support, indicating that the resilience of the domestic economy remains intact. Fundamentals side, the operating capacity of domestic primary aluminum remained stable, with expectations of a slight decrease in subsequent casting ingot volumes. Domestic aluminum ingot inventory temporarily maintained a destocking trend. On the cost side, the impact of the Guinea mine incident on alumina prices has eased somewhat, and the real-time cost of primary aluminum declined slightly MoM. On the demand side, there is dual pressure from domestic seasonal weakness and trade uncertainties. In the short term, the operating rate of aluminum processing enterprises will be under pressure, and the off-season atmosphere will intensify. New orders in sectors such as building materials, PV, and automobiles are showing signs of weakness. Overall, the current low inventory and expectations of an increase in the proportion of liquid aluminum provide strong support for aluminum prices. However, the overall bearish macroeconomic environment during the week has caused aluminum prices to face downward pressure at high levels, and the off-season pressure on the demand side limits upside room. Spot aluminum ingot in major consumption areas may soon face a situation of weak supply and demand. In the short term, aluminum prices are expected to remain in the doldrums. SMM expects that the most-traded SHFE aluminum 2507 contract will trade between 19,500 and 20,300 yuan/mt next week, while LME aluminum will trade between $2,400 and $2,520/mt.
