SHFE aluminum fluctuates, social inventory continues to pull back [SHFE aluminum closing comment]

SHFE aluminum fluctuated during the day, with the most-traded contract closing down 0.1%. The supply of aluminum remained relatively stable, and demand was expected to weaken during the off-season. However, social inventory continued to pull back, supporting aluminum prices.

In terms of supply, the current operating capacity of domestic primary aluminum remained at highs. Considering the progress of remaining new or replacement projects this year, there was no immediate expectation of new capacity coming online in the short term, indicating relatively small changes in the supply side of primary aluminum. On the demand side, as the seasonal consumption off-season approached, downstream demand showed signs of weakening. It was reported that the operating rate of primary aluminum processing enterprises gradually declined, and the overall market began to contract, with the PV sector showing particularly significant weakness, and demand in the construction sector continuing to weaken. The peak delivery period for the aluminum wire and cable industry had passed, and enterprise operating rates also slightly declined. However, there was a rush to export and the NEV sector performed well, indicating continued resilience in consumption.

In terms of inventory, social inventory of aluminum ingots continued to pull back over the weekend. Galaxy Futures stated that domestic and overseas aluminum ingot inventories maintained a destocking trend, with overseas spot aluminum basis turning to a premium. Domestic social inventory of aluminum ingots continued to decline. As prices rebounded, downstream willingness to pick up goods might weaken in the short term, but the expectation of destocking throughout June remained unchanged. Subsequent attention would be paid to whether inventory would approach 400,000 mt in early July.

Regarding the current trend, Xinhu Futures stated that seasonal consumption declined during the off-season, with producers in traditional end-use markets such as construction and home appliances experiencing reduced operating rates. Similarly, after the installation rush in the PV market ended, enterprise operating rates also declined. Currently, the NEV market was performing strongly, and there was still a rush to export, but the overall trend of weakening consumption was difficult to reverse. Overall changes in the supply side remained relatively small. The supply and demand fundamentals were weakening, putting pressure on aluminum prices. However, the current low inventory situation posed a risk of a short squeeze, and near-month contracts might fluctuate repeatedly.