Mixed market sentiments, aluminum prices expected to fluctuate [SMM Aluminum Morning Meeting Summary]

6.10 SMM Aluminum Morning Meeting Minutes

Futures market: During the previous night session, the most-traded SHFE aluminum 2507 contract opened at 20,075 yuan/mt, reached a high of 20,100 yuan/mt, touched a low of 20,040 yuan/mt, and closed at 20,060 yuan/mt, up 0.17% from the previous close. LME aluminum opened at $2,452.5/mt, hit a high of $2,484/mt, fell to a low of $2,445/mt, and settled at $2,483/mt, up 1.28%.

Macro: (1) On the afternoon of June 9 local time, the first meeting of the China-US economic and trade consultation mechanism was held in London, UK. According to Yuyuan Tantian, the meeting will continue on June 10 local time. (Neutral★) (2) NBS data showed that in May, CPI fell 0.2% MoM and 0.1% YoY, while core CPI excluding food and energy prices rose 0.6% YoY, with the growth rate expanding by 0.1 percentage points from the previous month. PPI declined 0.4% MoM, maintaining the same drop as last month, and fell 3.3% YoY, with the decline widening by 0.6 percentage points MoM. NBS stated that the MoM CPI shift from growth to decline was mainly affected by lower energy prices. PPI remained at low levels, but marginal changes indicated improved supply-demand relationships in some sectors due to intensified macro policy implementation, showing positive price movements. (Bullish★) (3) Customs data revealed that in the first five months of this year, China's equipment manufacturing product exports reached 6.22 trillion yuan, up 9.2% YoY, accounting for 58.3% of total exports. Notably, EVs and industrial robots grew significantly by 19% and 55.4% respectively. The equipment manufacturing sector contributed 73% to overall export growth, reaching 76.9% in May, becoming a key pillar for stable foreign trade growth. (Bullish★)

Fundamentals: (1) Customs data showed that China's unwrought aluminum and aluminum semis exports totaled 506,000 mt in March 2025, down 1.17% YoY but up 24.02% MoM. Cumulative exports from January-March reached 1.365 million mt, down 7.6% YoY. (Bullish★) (2) Raw material side, fluorite: Current delivery-to-factory prices for 97% fluorite powder used by aluminum fluoride producers ranged between 3,200-3,550 yuan/mt. The fluorite market remained sluggish with intense supply-demand competition, and the price center continued to decline. (Bearish★) (3) According to SMM statistics, social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 15,373 mt on June 9, up 411 mt from the previous trading day. (Bullish★) (4) CPCA data indicated that China's passenger vehicle retail sales reached 1.96 million units in May, up 13.9% YoY and 10% MoM. January-May cumulative retail sales stood at 8.934 million units, up 9.5% YoY. In May, the retail sales of passenger new energy vehicles (NEVs) reached 1.021 million units, up 28.2% YoY and 12.1% MoM. From January to May, cumulative retail sales totaled 4.351 million units, a 34.1% increase. (Neutral)

Primary Aluminum Market: On the previous trading day, SHFE aluminum surged to around 20,180 yuan/mt in the morning session before pulling back slightly, fluctuating rangebound around 20,130 yuan/mt. Under the high inter-month spread structure, suppliers faced increased inventory pressure and were more eager to sell. However, downstream consumption began to weaken, with some processed materials operating at reduced capacity. The market generally traded at a discount of 10 yuan/mt against SMM transactions. On the previous trading day, SMM A00 aluminum was quoted at 20,210 yuan/mt, down 20 yuan/mt from the previous day, with a premium of 70 yuan/mt against the June contract, a decrease of 10 yuan/mt from the previous day. In the central China market, supply was tight, and suppliers maintained high premiums amid low inventory, with offers ranging from a 10 yuan/mt premium to parity. However, downstream processed materials enterprises saw a nearly continuous decline in shipments since June, with finished product inventories starting to build up. Some enterprises gradually began to cut production, and there was an expectation of a downward trend in premiums. SMM central China A00 aluminum was recorded at 20,150 yuan/mt against the SHFE aluminum 2506 contract, down 20 yuan/mt from the previous day. The price spread between Henan and Shanghai was -60 yuan/mt, unchanged from the previous day, with a 10 yuan/mt premium against the 2506 contract, down 10 yuan/mt.

Secondary Aluminum Raw Materials: Prices in the aluminum scrap market generally held steady yesterday. With the onset of the off-season in June, downstream scrap utilization enterprises faced weak order releases, with procurement mainly driven by immediate needs. Yesterday, the centralized quotes for baled UBC aluminum scrap ranged from 15,000-15,500 yuan/mt (tax-exclusive), while shredded aluminum tense scrap was quoted at 15,500-17,000 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other places closely tracked aluminum prices, with price adjustments ranging from 0-50 yuan/mt. In Jiangxi, Foshan, Guizhou, and other regions, price adjustments lagged behind aluminum prices, with quotes remaining unchanged from the previous day. In Anhui, centralized price adjustments were made for ADC12 aluminum shavings and mechanical casting aluminum scrap, with adjustments ranging from 100-200 yuan/mt. By product, baled UBC prices remained unchanged from the previous day in Henan, Foshan, Jiangxi, and other places, while Sichuan, Chongqing, Shanghai, Zhejiang, and other regions saw an overall decrease of 50 yuan/mt. It is expected that the aluminum scrap market will continue to fluctuate at highs. The tight supply of aluminum tense scrap is unlikely to change, with 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, combined with weak demand during the off-season, may suppress upside room. The operating rate of downstream secondary aluminum enterprises may remain low, with an ongoing struggle between costs and orders. Regarding reverse invoicing, Jiangxi, Anhui, Hubei, and other places are actively promoting its implementation among producers and suppliers. According to feedback from some scrap utilization enterprises, the tax costs arising from reverse invoicing will be shared by suppliers and producers, ultimately being passed on to raw material prices. On the other hand, cast aluminum alloy futures will be listed on June 10. Futures arbitrage activities may temporarily boost the activity of the secondary aluminum alloy market. As aluminum scrap is a core raw material for production, its price sensitivity may be further triggered.

Secondary aluminum alloy: Yesterday, the SMM A00 aluminum price fell by 20 yuan/mt from the previous trading day to 20,210 yuan/mt. The domestic SMM ADC12 price remained stable within the range of 19,900-20,100 yuan/mt. In the import market, the CIF price of imported ADC12 continued to range between $2,370 and $2,400/mt, with the real-time import loss hovering around 400 yuan/mt. Affected by the narrow fluctuation of aluminum prices and the upcoming listing of cast aluminum alloy futures on Tuesday, market participants showed little willingness to adjust prices on Monday, opting instead to maintain stability and adopt a wait-and-see attitude. Cast aluminum alloy futures will be listed for trading starting from June 10, 2025, with listed contracts ranging from AD2511 to AD2605. The benchmark price for the listed contracts is set at 18,365 yuan/mt. Given that this benchmark price is significantly lower than the spot price, the market sentiment is notably bullish, with attention focused on the 19,000-19,500 yuan/mt range on the first day of trading. Currently, the fundamental support is weak, and sluggish demand will continue to suppress the spot price of ADC12. The discount pattern to A00 aluminum is expected to persist in the short term.

Summary: On the macro front, the phone call between China and the US may lead to a de-escalation of the trade war. Meanwhile, the rebound in China's manufacturing PMI and the improvement in export indicators in May provide demand support, indicating that the resilience of the domestic economy remains intact. On the fundamentals side, the operating capacity of domestic primary aluminum remains stable. The reduction in casting ingot volume has contributed to 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, and the real-time cost of primary aluminum has declined slightly MoM. On the demand side, domestic seasonal weakness and trade uncertainties exert dual pressures. In the short term, the operating rate of aluminum processing enterprises will be under pressure, and the off-season atmosphere will intensify. Overall, the current low inventory and the expectation of a higher proportion of liquid aluminum provide strong support for aluminum prices. However, the off-season pressure on the demand side limits the upside room. Spot aluminum ingots in major consumption areas may soon face a situation of weak supply and demand, and aluminum prices are likely to remain rangebound and consolidate in the short term.

[The information provided is for reference only. This article does not constitute direct advice for investment research and decision-making. Clients should make prudent decisions and should not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]

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