Macro factors favoring the market and off-season demand compete, aluminum prices fluctuate at highs supported by low inventory [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on June 17

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2507 contract opened at 20,410 yuan/mt, with a high of 20,420 yuan/mt, a low of 20,355 yuan/mt, and closed at 20,385 yuan/mt, down 20 yuan/mt or 0.10% from the previous settlement. LME aluminum opened at $2,497.5/mt on the previous trading day, with a high of $2,521.5/mt, a low of $2,483/mt, and closed at $2,517/mt, up $14/mt or 0.56%.

Macro: (1) On June 16 local time, the US White House issued a statement indicating that US President Trump and UK Prime Minister Starmer jointly announced the general terms of a trade agreement. The US plans to set a quota of 100,000 units per year for UK car imports, with a tariff rate of 10%. (Bullish ★) (2) The Bank of Japan is expected to announce its monetary policy decision on Tuesday, maintaining interest rates unchanged and considering slowing the pace of bond purchase reductions. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of June 16, the aluminum billet inventory in major domestic consumption areas was 131,500 mt, an increase of 4,000 mt from the previous Thursday and 2,000 mt from the previous Monday. (Bearish ★) (2) On June 16, LME aluminum inventory was recorded at 351,200 mt, a decrease of 2,025 mt or 0.57% from the previous day. Over the past week, LME aluminum inventory has decreased by a cumulative 10,800 mt or 2.98%. Over the past month, LME aluminum inventory has decreased by a cumulative 44,300 mt or 11.19%. (Bullish ★)

Primary Aluminum Market: On Monday morning, the SHFE aluminum futures market showed a clear downward trend, with the price spread between the front-month and next-month contracts narrowing rapidly. By the end of the first trading session, the price spread had narrowed to 250 yuan/mt, a decrease of 180 yuan/mt from the previous Friday. In east China, despite the downward trend in the futures market and the narrowing price spread, downstream demand weakened during the off-season, and there was a strong fear of high prices. Market quotes were concentrated at a discount of 30 to 20 yuan/mt against SMM, with overall market trading being sluggish. On Monday, SMM A00 aluminum was reported at 20,630 yuan/mt, down 100 yuan/mt from the previous trading day, with a discount of 10 against the 06 contract, up 200 yuan/mt from the previous trading day. In central China, suppliers were eager to sell at a discount in the morning session. The spot market was at a discount of 30 to 20 yuan/mt against SMM central China. With the downstream entering the off-season and some plants announcing production cuts last week, overall demand was weak. Therefore, downstream purchase intentions were poor, with most transactions being long-term contracts and almost no spot purchases. On Monday, SMM central China A00 aluminum against the SHFE aluminum 2506 contract was recorded at 20,520 yuan/mt, down 120 yuan/mt from the previous trading day. The price spread between central China and east China was 110 yuan/mt, widening by 20 yuan/mt from the previous trading day, with a discount of 120 against the 2506 contract.

Secondary Aluminum Raw Materials: On Monday, spot primary aluminum prices continued to decline by 100 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,630 yuan/mt, with aluminum scrap market prices showing inconsistent increases. As the off-season in June progresses beyond the halfway mark, downstream scrap utilisation enterprises are experiencing sluggish order releases, with procurement primarily driven by immediate needs. On Monday, the centralized quotes for baled UBC aluminum scrap ranged from 15,350 to 15,850 yuan/mt (tax-exclusive), while shredded aluminum tense scrap quotes were concentrated between 15,900 and 17,400 yuan/mt (tax-exclusive). Regionally, regions such as Shanghai, Jiangsu, and Shandong closely tracked aluminum prices, with price adjustments ranging from 50 to 100 yuan/mt. In contrast, regions like Jiangxi, Hubei, Henan, and Foshan lagged behind aluminum price adjustments. After consecutive price increases last week following aluminum price trends, Monday's quotes remained unchanged from Friday, with wait-and-see sentiment temporarily prevailing. By product, baled UBC aluminum scrap, after a slight increase last week, rose by another 50 yuan/mt today, narrowing the price difference between A00 aluminum and aluminum scrap. Shredded aluminum tense scrap prices remained unchanged from Friday. It is anticipated that the aluminum scrap market will continue to fluctuate at highs. The tight supply situation for aluminum tense scrap is unlikely to change, providing firm 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 prices, combined with weak off-season demand, may suppress upside room. The operating rate of downstream secondary aluminum enterprises may remain low, with a persistent struggle between costs and orders. Additionally, following the listing of cast aluminum alloy futures, arbitrage activities may temporarily boost market activity, potentially increasing the price sensitivity of aluminum scrap, a core raw material. Caution is advised against short-term volatility risks.

Secondary Aluminum Alloy: On the futures market, the most-traded cast aluminum alloy futures contract 2511 opened at 19,400 yuan/mt on Monday, reaching a high of 19,480 yuan/mt and a low of 19,355 yuan/mt, before closing at 19,470 yuan/mt. This represented an increase of 40 yuan/mt or 0.21% from the previous close, with a trading volume of 5,526 lots and an open interest of 8,673 lots (-489 lots). In the spot market, SMM A00 aluminum prices fell by 100 yuan/mt from the previous trading day to 20,630 yuan/mt on Monday, while domestic SMM ADC12 prices remained stable within the range of 19,900 to 20,200 yuan/mt. Aluminum prices showed a downward trend on Monday, while the raw material end of secondary aluminum remained firm, providing support for ADC12 prices, with market quotes generally holding steady. Currently in the traditional off-season, new order growth is sluggish, and persistent weak demand on the demand side is suppressing the upside potential of ADC12 prices. However, cost support remains, and it is anticipated that ADC12 prices will maintain narrow adjustments in the short term. In the import market, the CIF quotes for imported ADC12 slightly increased to $2,420-$2,450/mt, while the spot import price remained stable around 19,200 yuan/mt, with immediate import losses slightly widening to 600 yuan/mt. The local tax-exclusive quotes for ADC12 in Thailand remained stable at 81-82 baht/kg.

Summary: On the macro front, the market is closely monitoring the tense situation between Israel and Iran, as well as the US Fed's policy meeting this week, which will conclude on Wednesday. The market generally expects the US Fed to maintain interest rates unchanged. Fundamentals side, the operating capacity of domestic aluminum has remained stable, and the reduction in casting ingot volume has kept domestic aluminum ingot inventory in a state of destocking. Cost side, prices of alumina and auxiliary materials are expected to weaken, leading to reduced cost support for aluminum. Demand side, the sector is facing dual pressures from domestic seasonal weakness and trade uncertainties, and in the short term, the operating rate of aluminum processing enterprises is expected to be under pressure. Overall, the current low inventory and the expectation of a higher proportion of liquid aluminum provide strong support for aluminum prices. However, the off-season pressure on the demand side limits the upside room. 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 decisions. Clients should make decisions cautiously and not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]

》Click to view the SMM aluminum industry chain database

》Subscribe to view historical spot prices of SMM metals