Destocking provides support for aluminum prices during the off-season, with aluminum prices expected to fluctuate considerably [SMM Aluminum Morning Meeting Summary]

6.9 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2507 contract opened at 19,980 yuan/mt, with a high of 20,020 yuan/mt, a low of 19,940 yuan/mt, and closed at 20,010 yuan/mt, down 0.3% from the previous close. LME aluminum opened at $2,477/mt, with a high of $2,483/mt, a low of $2,437/mt, and closed at $2,451/mt, down 0.95%.

Macro: (1) From June 8 to 13, He Lifeng will visit the UK and hold the first meeting of the China-US Economic and Trade Consultation Mechanism. (Bullish ★) (2) In response to a reporter's question about Minister Wang Wentao's talks with European Commission Executive Vice-President Valdis Dombrovskis on trade and economic security during his visit to France, the Ministry of Commerce stated that Minister Wang and Commissioner Dombrovskis had professional and in-depth discussions on the EV case, making a significant step forward towards a proper resolution. Currently, the price commitment consultations between China and the EU on the EV case have entered the final stage, but efforts from both sides are still needed. (Bullish ★) (3) The Yangtze River Delta High-Quality Development Promotion Association for the Belt and Road Initiative, Shanghai Automotive Parts Industry Association, Jiangsu Automobile Industry Association, Zhejiang Automobile Industry Association, and Anhui Automotive Engineering Society jointly signed a cooperation agreement on the "Establishment of the Yangtze River Delta NEV Go Global Base." This move marks a further acceleration in the global market expansion of the NEV industry in the Yangtze River Delta region. (Bullish ★)

Fundamentals: (1) According to SMM statistics on June 9, domestic primary aluminum social inventory fell by 27,000 mt to 477,000 mt. (Bullish ★★) (2) During the period, the tender pricing for downstream benchmark primary aluminum enterprises in June was finalized, with aluminum fluoride market prices continuing to weaken. The tender prices for benchmark enterprises in June fell by 150-200 yuan/mt to 9,630-9,700 yuan/mt. (Bearish ★) (3) From May 9 to June 6, SMM prebaked anode prices remained stable with a downward trend. The benchmark procurement price for a Shandong aluminum plant in June 2025 was 4,939 yuan/mt, unchanged from the previous month's benchmark price. According to SMM, prebaked anode export order prices in June were mainly adjusted downward due to falling costs, with adjustments concentrated around $15-30/mt. As of now, SMM anode prices in east China closed at 4,939-8,133 yuan/mt. (Bearish ★)

Primary Aluminum Market: On the previous trading day, SHFE aluminum fluctuated in the morning session. The impact of the previous day's China-US tariff developments was not evident in the futures market. With mixed bullish and bearish factors in the fundamentals, the overall futures market fluctuated. In the spot market, east China spot performance weakened, with the market dominated by selling. High premiums continued to pull back. Early in the morning, transactions were concluded at -10 yuan/mt from the SMM average price, and later, transactions were mainly concluded at -10 yuan/mt. On the previous trading day, SMM A00 aluminum was quoted at 20,230 yuan/mt, down 20 yuan/mt from the previous trading day, with a premium of 80 against the 06 contract, narrowing by 10 yuan/mt from the previous trading day. In the central China market, transactions on the previous trading day were priced against the average SMM central China price. However, downstream feedback currently indicates weakening demand and successive production cuts. Against the backdrop of weak supply and demand, it is expected that the subsequent premium will weaken. SMM central China A00 was recorded at 20,170 yuan/mt against the SHFE aluminum 2506 contract, down 20 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was 60 yuan/mt, unchanged from the previous trading day, with a premium of 20 against the 2506 contract.

Secondary aluminum raw materials: On the previous day, spot primary aluminum fell 20 yuan/mt from the prior trading day, with SMM A00 spot closing at 20,230 yuan/mt. The overall price in the aluminum scrap market remained stable, with baled UBC aluminum scrap concentratedly quoted at 15,000-15,500 yuan/mt (tax excluded) and shredded aluminum tense scrap concentratedly quoted at 15,500-17,000 yuan/mt (tax excluded). The tight supply pattern of aluminum tense scrap remains unchanged, with solid price support. Wrought aluminum alloy scrap continues to fluctuate rangebound with primary aluminum, but the risk of high-level callback in primary aluminum, coupled with weak demand during the off-season, may suppress upside room. The operating rate of downstream secondary aluminum enterprises may remain low, with an unresolved struggle between costs and orders. It is expected that the aluminum scrap market will continue to fluctuate at highs.

Secondary aluminum alloy: On Friday, SMM A00 aluminum prices fell 20 yuan/mt from the previous trading day to 20,230 yuan/mt, while domestic SMM ADC12 prices remained stable within the range of 19,900-20,100 yuan/mt. In the import market, the CIF quote for imported ADC12 continued to be at 2,370-2,400 US dollars/mt, with an immediate import loss of around 400 yuan/mt. The domestic quote for ADC12 in Thailand (tax excluded) was at 81-81.5 Thai baht/kg. After June, there has been little improvement in end-use consumption, with downstream procurement sentiment remaining low. In terms of inventory, according to SMM statistics, the total social inventory of secondary aluminum alloy casting ingots in Foshan, Ningbo, and Wuxi on June 6 was 14,962 mt, an increase of 101 mt from the previous trading day, maintaining the inventory buildup trend. Overall, insufficient demand will continue to constrain the upside room for prices, while the cost support formed under the tight supply pattern of raw materials may still exist.

Summary: On the macro side, the phone call between China and the US may lead to a de-escalation of the trade war, while the rebound in China's May manufacturing PMI and improvement in export indicators provide demand support, indicating that the resilience of the domestic economy remains. On the fundamentals side, the operating capacity of domestic primary aluminum has remained stable, with a decrease in casting ingot volume prompting a temporary destocking trend in domestic aluminum ingot inventory. On the cost side, the impact of the Guinea mine incident on alumina prices has eased somewhat, with the real-time cost of primary aluminum slightly decreasing MoM. On the demand side, it faces dual pressures from domestic seasonal weakness and trade uncertainties. In the short term, the operating rate of aluminum processing enterprises will be under pressure, with the off-season atmosphere intensifying. Overall, the current low inventory and the expectation of a higher proportion of liquid aluminum are providing strong support for aluminum prices. However, the pressure of the off-season in the demand side limits the upside room. Spot aluminum ingots in major consumption areas may soon face a situation of weak supply and demand. In the short term, aluminum prices are likely to remain volatile and range-bound.

[The information provided 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 rely on this to replace their own independent judgment. Any decisions made by clients are not related to SMM.]

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