Macro bullishness coupled with destocking support pushes aluminum price center higher [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on June 12

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2507 contract opened at 20,230 yuan/mt, with a high of 20,310 yuan/mt, a low of 20,215 yuan/mt, and closed at 20,250 yuan/mt, unchanged from the previous settlement. LME aluminum opened at $2,489.0/mt, with a high of $2,527.5/mt, a low of $2,489.0/mt, and closed at $2,516.5/mt, up 0.44%.

Macro: (1) From June 9 to 10 local time, the first meeting of the China-US economic and trade consultation mechanism was held in London, UK. Both sides engaged in candid and in-depth dialogue, exchanged in-depth views on economic and trade issues of mutual concern, reached a consensus in principle on the measures framework for implementing the important consensus reached during the phone call between the two heads of state on June 5 and consolidating the outcomes of the Geneva economic and trade talks, and made new progress in addressing each other's economic and trade concerns. (Bullish ★★) (2) Xi Jinping emphasized that China is willing to implement zero-tariff measures for 100% of tariff lines for products from 53 African countries with which it has diplomatic relations through the signing of a common development economic partnership agreement, while providing more convenience for the least developed African countries to export to China. (Bullish ★) (3) The latest US inflation data remained mild. According to the US Department of Labor, the CPI rose 2.4% YoY and 0.1% MoM in May, while the core CPI, excluding food and energy prices, rose 2.8% YoY and 0.1% MoM, both lower than expected. Following the release of the CPI data, US President Trump called on the US Fed to cut interest rates by one percentage point. Wall Street traders also increased their bets on a US Fed interest rate cut, generally expecting two cuts this year, with interest rate swaps indicating a 75% probability of a cut by the US Fed before September. However, the US Fed may continue to hold steady at its interest rate-setting meeting next week. (Neutral)

Fundamentals: (1) According to SMM statistics, the SMM's three-location daily inventory on June 11 was recorded at 344,500 mt, down 11,900 mt MoM. (Bullish ★) (2) According to SMM statistics, the social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi on June 11 totaled 16,183 mt, an increase of 279 mt from the previous trading day. (Neutral)

Primary Aluminum Market: In the morning session of the previous trading day, the center of SHFE aluminum prices continued to break through upwards, rising above the narrow fluctuation rangebound near 20,300 yuan/mt. Cargo availability was tight in east China, and suppliers took the opportunity to maintain high premiums. The main reasons were: 1) Expected fewer in-transit cargoes; 2) Ultra-low inventory levels in the spot market; 3) Major players purchasing at high premiums in the market. The market traded at a premium of 20-30 yuan/mt against the SMM average price. Today, SMM A00 aluminum was quoted at 20,400 yuan/mt, up 240 yuan/mt from the previous trading day, with a premium of 90 yuan/mt against the June contract, up 20 yuan/mt from the previous trading day. In the central China market, despite low inventory levels, suppliers maintained high premiums, with offers ranging from a premium of 10 yuan/mt to parity. However, the actual supply situation in the central China market was not tight. Due to the low inventory levels, suppliers were reluctant to sell, showing strong sentiment to hold back cargoes. As the center of aluminum prices continued to rise during the day, market shipments began to increase. Entering June, the shipments of downstream processing enterprises continued to decline almost continuously. Finished product inventories have started to accumulate, and some enterprises have gradually begun to cut production, with divergences emerging between buyers and sellers. SMM recorded the central China A00 aluminum price against the SHFE aluminum 2506 contract at 20,350 yuan/mt, up 250 yuan/mt from the previous trading day. The price difference between Henan and Shanghai was -50 yuan/mt, up 10 yuan/mt from the previous trading day. It was trading at a premium of 40 yuan/mt against the 2506 contract, up 30 yuan/mt from the previous trading day.

Secondary aluminum raw materials: The spot price of primary aluminum surged by 240 yuan/mt from the previous trading day. SMM A00 aluminum spot price closed at 20,400 yuan/mt, with aluminum scrap market prices generally following suit. As the June off-season began, 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 15,050 to 15,550 yuan/mt (tax-exclusive), while shredded aluminum tense scrap was quoted at 15,700-17,200 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other regions closely tracked aluminum prices, with price adjustments ranging from 200-250 yuan/mt. Jiangxi, Foshan, Guizhou, and other regions lagged behind aluminum price adjustments, with price adjustments ranging from 100-150 yuan/mt. By product, the prices of baled UBC and mixed aluminum extrusion scrap free of paint increased slightly by 50-100 yuan/mt overall, while the prices of bare bright aluminum wire and shredded aluminum tense scrap rose by 200 yuan/mt. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai increased by 30 yuan/mt from yesterday to 1,847 yuan/mt. The price difference between A00 aluminum and aluminum extrusion scrap in Foshan increased by 100 yuan/mt from yesterday to 1,514 yuan/mt. It is expected that the aluminum scrap market will continue to fluctuate at highs.

Secondary aluminum alloy: On the futures market, the most-traded cast aluminum alloy 2511 futures contract opened at 19,200 yuan/mt yesterday, oscillated higher during the day, reaching a high of 19,525 yuan/mt, and closed at 19,400 yuan/mt, up 210 yuan/mt from the previous close, a gain of 1.09%. Trading volume was 27,911 lots, and open interest was 10,419 lots (+696 lots). In the spot market, the SMM A00 aluminum price increased by 240 yuan/mt from the previous trading day to 20,400 yuan/mt yesterday. The domestic SMM ADC12 price remained stable within the range of 19,800-20,000 yuan/mt. Yesterday, the ADC12 market generally maintained stable quotes or increased by 100 yuan/mt. Currently in the off-season, weak demand continues to suppress its upside room, while the cost side provides some support. In the short term, the spot price of ADC12 will likely maintain a narrow rangebound fluctuation, and the discount status against A00 aluminum may persist. In the import market, the CIF quote for imported ADC12 continued to rise slightly to 2,400-2,420 US dollars/mt, with the import spot price reported around 19,100 yuan/mt, and the immediate import loss widened again to 600 yuan/mt. The local ADC12 price in Thailand, excluding tax, was 81-81.5 Thai baht/kg.

Summary: Overall, on the macro side, the Sino-US consultation meeting is expected to ease 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, low inventory and the expectation of a rising proportion of liquid aluminum provide strong support for aluminum prices. However, the pressure of 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 cautious decisions and should not rely on this information to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.]

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