Low inventory provides strong support for prices. Aluminum prices are expected to fluctuate [SMM Aluminum Morning Meeting Summary]

6.11 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2507 contract opened at 20,090 yuan/mt, with a high of 20,180 yuan/mt, a low of 20,090 yuan/mt, and closed at 20,140 yuan/mt, up 0.30% from the previous settlement. LME aluminum opened at $2,481.0/mt, with a high of $2,494.5/mt, a low of $2,462.0/mt, and closed at $2,494/mt, up 0.44%.

Macro: (1) The US and Mexico are on the verge of reaching an agreement to eliminate Trump's 50% tariff on steel imports below a certain quantity. (Bullish ★) (2) The World Bank has revised down its global GDP growth forecast from 2.7% to 2.3%, predicting that trade disputes and policy uncertainties will hinder economic growth. (Bearish ★) (3) Minister of Commerce Wang Wentao met with UK Secretary of State for Business and Trade Reynolds in London. Both sides agreed to jointly implement the important consensus reached by the leaders of the two countries, hold the 14th meeting of the China-UK Joint Economic and Trade Commission as soon as possible, and promote pragmatic cooperation in various fields of economy and trade. (Bullish ★) (4) According to Yuyuantantian, on June 10 local time, the first meeting of the China-US economic and trade consultation mechanism entered its second day. The meeting started in the morning and continued after lunch. (Neutral)

Fundamentals: (1) According to SMM data, on June 10, the daily inventory of aluminum ingots in three domestic regions was 356,400 mt, a destocking of 1,000 mt from the previous trading day; the combined daily inventory of aluminum billets in two regions was 76,500 mt, a destocking of 1,400 mt from the previous trading day. (Bullish ★) (2) At 9:00 a.m. on June 10, cast aluminum alloy futures were officially listed on the Shanghai Futures Exchange. The benchmark listing prices for the AD2511, AD2512, AD2601, AD2602, AD2603, AD2604, and AD2605 contracts were 18,365 yuan/mt. In the morning opening, the main cast aluminum alloy futures contract once surged over 5%, and although the gains slightly pulled back later, they remained at around 4%. By the end of the day session, the main cast aluminum alloy futures contract closed at 19,190 yuan/mt, up 4.649%. (Neutral) (3) Under the continuous calls from regulatory authorities to combat "cut-throat competition," some automakers have taken the initiative to make commitments not to delay payments to suppliers. Five automobile producers, namely FAW Group, Dongfeng Motor, GAC Group, Seres, and BYD, have issued statements respectively, committing to "payment terms not exceeding 60 days." (Bullish ★)

Primary Aluminum Market: In the morning session of the previous trading day, the center of SHFE aluminum prices dropped to around 20,500 yuan/mt before staging a V-shaped reversal, rising again above 20,100 yuan/mt. In east China, after the futures market declined, market purchasing sentiment improved. Coupled with major players purchasing in the market, the market traded at parity to a premium of 10 yuan/mt over SMM transactions, with premiums and discounts becoming firmer. On the previous trading day, SMM A00 aluminum was reported at 20,160 yuan/mt, down 50 yuan/mt from the previous trading day, with a premium of 70 yuan/mt against the 06 contract, unchanged from the previous trading day. In the central China market, supply was tight, and suppliers maintained high premiums amid low inventory, coupled with a pullback in the futures market's center, with offers ranging from a premium of 10 yuan/mt to parity. However, downstream processed material enterprises saw a nearly continuous decline in shipments in June, with finished product inventories beginning to build up. Some enterprises have gradually started to cut production, and there is still an expectation of a decline in premiums. SMM central China A00 aluminum was recorded at 20,100 yuan/mt against the SHFE aluminum 2506 contract, down 50 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 10 yuan/mt against the 2506 contract, unchanged from the previous trading day.

Secondary aluminum raw materials: Yesterday, the spot price of primary aluminum fell slightly by 50 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,160 yuan/mt. Prices in the aluminum scrap market were generally stable. 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 those for shredded aluminum tense scrap ranged from 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 places, price adjustments lagged behind aluminum prices, with quotes unchanged from the previous day. By product, the price of baled UBC aluminum scrap was generally unchanged from the previous day, while the price of bare bright aluminum wire decreased by 100 yuan/mt. It is expected that the aluminum scrap market will continue to fluctuate at highs.

Secondary aluminum alloy: Yesterday, the SMM A00 aluminum price fell by 50 yuan/mt from the previous trading day to 20,160 yuan/mt, while the domestic SMM ADC12 price decreased by 100 yuan/mt to the range of 19,800-20,000 yuan/mt. In the import market, the CIF quote for imported ADC12 rose slightly to 2,390-2,410 US dollars/mt, with the immediate import loss slightly widening to 500 yuan/mt. Yesterday marked the first trading day for the listing of cast aluminum alloy futures. Due to the listing benchmark price being significantly lower than the spot price, driven by the spot-futures price spread correction, the main cast aluminum alloy futures contract surged strongly at the opening, with gains once exceeding 5%. By the end of the day session, the main cast aluminum alloy futures contract closed at 19,190 yuan/mt, up 4.649%. In the spot market, ADC12 quotes were generally stable or fell by 100 yuan/mt yesterday. With weak fundamental support and persistent weak demand suppressing prices, the discount status of ADC12 against A00 aluminum is likely to continue in the short term.

Summary: Overall, on the macro front, the Sino-US consultation meeting may lead to a de-escalation of the trade war, while the rebound in China's manufacturing PMI and improvement in export indicators in May provide demand support, indicating that the resilience of the domestic economy remains. Fundamentals. Currently, the low inventory and the expectation of a higher proportion of liquid aluminum provide strong support for aluminum prices. However, the pressure from the off-season on the demand side limits the upside room. The 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 information to replace their own independent judgment. Any decisions made by clients are not related to SMM.]

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