Low spot cargo volume drives up futures, aluminum prices expected to hold up well [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on June 13

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2507 contract opened at 20,360 yuan/mt, with a high of 204,350 yuan/mt, a low of 20,345 yuan/mt, and closed at 20,420 yuan/mt, up 0.12% from the previous settlement. LME aluminum opened at $2,514.0/mt, with a high of $2,529.5/mt, a low of $2,505.5/mt, and closed at $2,519.5/mt, up 0.12%.

Macro: (1) In response to a reporter's question about the "first meeting of the China-US economic and trade consultation mechanism," the Ministry of Foreign Affairs stated that the meeting was held under the strategic guidance of the heads of state of the two countries. The two sides reached a consensus in principle on measures to implement the important consensus reached during the phone call between the heads of state on June 5 and to consolidate the outcomes of the Geneva economic and trade talks, making new progress in addressing each other's economic and trade concerns. (Bullish ★) (2) Data from the State Taxation Administration showed that in May, the real economy continued to grow, with manufacturing sales revenue accounting for 30.1% of the total sales revenue of enterprises nationwide. (Bullish ★) (3) Trump stated, "If inflation rises, I agree with the US Fed raising interest rates, but now inflation is falling, so I may have to take some measures." (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of June 12, the aluminum billet inventory in major domestic consumption areas was 127,500 mt, a decrease of 2,000 mt from Monday. (Bullish ★) (2) According to SMM statistics, as of June 12, the inventory of primary aluminum ingots in major domestic consumption areas was 460,000 mt, a decrease of 17,000 mt from this Monday and 44,000 mt from last Thursday. (Bullish ★)

Primary Aluminum Market: In the morning session of the previous trading day, the center of SHFE aluminum prices continued to break through upwards, fluctuating rangebound near 20,500 yuan/mt. Cargo availability in east China was tight, and the backwardation structure further expanded, with suppliers continuing to hold firm on premiums. 1. In-transit cargoes are expected to be limited; 2. The ultra-low inventory state in the spot market is expected to lead to tight deliverable cargo availability; 3. Major players are purchasing at high premiums in the market. The market traded at a premium of 30-40 yuan/mt against the SMM average price. Yesterday, SMM A00 aluminum was reported at 20,650 yuan/mt, up 250 yuan/mt from the previous trading day, with a premium of 70 yuan/mt against the June contract and 220 yuan/mt against the July contract. In the central China market, suppliers followed the price-holding trend in east China in the morning session, with the market trading around a premium of 10 yuan/mt to parity. However, as futures prices rose, downstream buying interest weakened, with offers falling to a discount of 10 yuan/mt against central China prices. Additionally, after the price difference between primary aluminum and aluminum scrap widened, some downstream buyers switched to purchasing aluminum scrap, weakening the primary aluminum market. SMM central China A00 aluminum was recorded at 20,590 yuan/mt against the SHFE aluminum 2506 contract, up 240 yuan/mt from the previous trading day. The price difference between central China and east China was -60 yuan/mt, down 10 yuan/mt from the previous trading day, with a premium of 10 yuan/mt against the 2506 contract.

Secondary Aluminum Raw Materials: Yesterday, spot primary aluminum prices continued to rise by 250 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,650 yuan/mt, with aluminum scrap market prices generally following suit. As the off-season in June began, downstream scrap utilization enterprises faced weak order releases, with procurement mainly driven by immediate needs. Yesterday, the concentrated quotes for baled UBC aluminum scrap ranged from 15,150-15,650 yuan/mt (tax-excluded), while shredded aluminum tense scrap quotes were concentrated at 15,900-17,400 yuan/mt (tax-excluded prices). Regionally, areas such as Shanghai, Jiangsu, Shandong, and Jiangxi closely tracked aluminum prices, with price adjustments ranging from 200-250 yuan/mt. In contrast, regions like Hunan, Hubei, Foshan, and Guizhou lagged behind aluminum price adjustments, with price changes ranging from 100-150 yuan/mt. By product, prices for baled UBC and mixed aluminum extrusion scrap free of paint generally increased slightly by 100-150 yuan/mt, while bare bright aluminum wire and shredded aluminum tense scrap prices rose by 200 yuan/mt. Regarding the price difference between A00 aluminum and aluminum scrap, the price spread between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 21 yuan/mt from yesterday to 1,826 yuan/mt. In Foshan, the price difference between A00 aluminum and aluminum extrusion scrap widened by 141 yuan/mt from yesterday to 1,655 yuan/mt. It is expected that the aluminum scrap market will continue to fluctuate at highs. The tight supply of aluminum tense scrap remains unchanged, providing 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 off-season demand, may suppress upside room. The operating rate of downstream secondary aluminum enterprises is likely to remain low, with a persistent struggle between costs and orders.

Secondary Aluminum Alloy: On the futures market, yesterday, the most-traded cast aluminum alloy futures contract 2511 opened at 19,435 yuan/mt, holding up well during the day, reaching a high of 19,490 yuan/mt, and closing at 19,460 yuan/mt, up 60 yuan/mt from the previous close, a 0.31% increase. Trading volume was 12,742 lots, with open interest at 10,862 lots (+443 lots). In the spot market, yesterday, SMM A00 aluminum prices rose by 250 yuan/mt from the previous trading day to 20,650 yuan/mt. Domestic SMM ADC12 prices increased by 100 yuan/mt to the range of 19,900-20,100 yuan/mt. Driven by rapid cost increases, ADC12 market quotes generally rose by 100 yuan/mt yesterday, but weak demand continued to suppress its price upside room. It is expected that ADC12 prices will mainly adjust within a narrow range in the short term, with its discount to A00 aluminum likely to persist. In the import market, the CIF quotes for imported ADC12 rose again to $2,410-2,450/mt, with import spot prices increasing by 100 yuan/mt to around 19,200 yuan/mt. As overseas price increases outpaced the domestic market, immediate import losses widened again to 500-700 yuan/mt. Local ADC12 quotes in Thailand (tax-excluded) rose to 81-82 Thai baht/kg.

Summary: Overall, on the macro front, the Sino-US consultation meeting is expected to ease trade tensions, while the rebound in China's May manufacturing PMI and improved export indicators provide demand support, indicating continued resilience in the domestic economy. 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 expected to hold up well.

[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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