Macro interest rate cut expectations, coupled with ultra-low inventory, hide gaming risks amid aluminum prices holding up well [SMM Weekly Aluminum Price Review]

On the macro front, the US core CPI fell below expectations, heightening market expectations for a US Fed interest rate cut in September. China and the US reached a consensus in principle on a framework of measures to implement and consolidate the outcomes of the Geneva economic and trade talks during their economic and trade consultations. However, market concerns about the future economic outlook remain, with macro sentiment generally neutral to cautious.

From a fundamental perspective, the operating capacity of domestic electrolytic aluminum remained stable. It should be noted that with the weakening of aluminum billet consumption, processing fees have been declining continuously, and expectations for an increase in casting ingot production at month-end have emerged. However, in the short term, the domestic market will still maintain an ultra-low inventory level. On the cost side, the real-time cost of electrolytic aluminum increased slightly by 18 yuan/mt WoW to 17,199 yuan/mt, with domestic aluminum smelters maintaining a high-profit status. Demand side, with the onset of the off-season, shipments from downstream processed material enterprises have declined, leading to an accumulation of finished product inventories. Some processed material enterprises have already begun to cut production and reduce loads. According to SMM observations, most terminal consumption sectors have not shown signs of a super-seasonal weakening. However, caution should be exercised as the high aluminum prices may further dampen consumption.

The inventory port is currently the biggest contradiction in the aluminum fundamentals. The historically low inventory levels both domestically and overseas have strengthened the price spread between futures contracts and fueled absolute prices. The low inventory situation is unlikely to change in the short term. Historically, aluminum ingot inventories have tended to destock in most June months, while overseas, there is a risk of renewed transfer to delivery warehouse at the LME in the next 2-3 weeks after a decline in large holders' open interest.

According to SMM statistics, low domestic arrivals still support the destocking trend. After a rapid breakthrough at the 500,000 mt threshold, there is still room for further decline. It is expected that aluminum prices will hold up well in the short term. Next week, SHFE aluminum is expected to trade within the range of 20,200-20,700 yuan/mt. Technically, if it holds above 20,500 yuan/mt, it is expected to test the 21,000 yuan/mt resistance level. LME aluminum is expected to trade within the range of 2,470-2,570 US dollars/mt. After breaking through the key resistance level of 2,450 US dollars/mt, LME aluminum is expected to hold up well.

The SMM model predicts that the price range for the most-traded aluminum contract's closing price from this Friday to next Thursday (2025-06-19) will be [19,890, 20,880], with a price center of 20,370 yuan/mt. The extreme price range is [19,300, 21,470], the normal price range is [19,690, 21,080], and the conservative price range is [20,090, 20,680]. The price trend next week is expected to hold up well. The support range is [19,690, 20,090], and the resistance range is [20,680, 21,080].

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