Has the inflection point of inventory buildup in social inventory of aluminum ingots already formed? The bullish market sentiment still dominates [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on June 23

Futures Market: On Friday, the most-traded SHFE aluminum 2508 contract opened at 20,425 yuan/mt, with a high of 20,465 yuan/mt, a low of 20,400 yuan/mt, and closed at 20,425 yuan/mt. Trading volume was 56,000 lots, and open interest was 248,000 lots. On Friday, LME aluminum opened at $2,525/mt, with a high of $2,564/mt, a low of $2,513/mt, and closed at $2,561.5/mt. Trading volume was 13,000 lots, and open interest was 3,000 lots.

Macro: (1) Fed Governor Waller: Interest rate cuts could potentially occur as early as the July meeting. Fed's Barkin: Current data does not show an urgent need for interest rate cuts. Fed's Daly: Economic fundamentals are moving in a direction that may require interest rate cuts. (Neutral ★) (2) Trump: The US military conducted air strikes on three major Iranian nuclear facilities, including Fordow, and Iran must immediately agree to end the war. Iranian Foreign Minister: Nuclear facilities can be rebuilt even if destroyed, and technical knowledge "cannot be bombed away." (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of June 23, SMM's social inventory of primary aluminum ingots in China was 464,000 mt, an increase of 15,000 mt from last Thursday on a WoW basis. (Bearish ★) (2) There have been no changes to the policy of expanding the scope of the trade-in policy for consumer goods. The progress of subsidy fund utilization is in line with expectations, and central government funds will be disbursed in the third and fourth quarters. (Bullish ★) (3) According to customs data, China's exports of aluminum plate/sheet and strip in May 2025 were 278,900 mt, up 0.5% MoM and down 4.4% YoY. China's exports of aluminum foil in May 2025 were 121,300 mt, down 0.5% MoM and down 6.8% YoY. (Neutral ★)

Primary Aluminum Market: On Friday morning, due to low aluminum ingot inventory and continued destocking, the price center of SHFE aluminum shifted upwards. However, against the backdrop of the off-season, actual demand remained weak, and the futures market pulled back. The spot market saw slightly improved trading due to weekend stockpiling demand, but downstream purchase willingness remained low. In east China, the market offered at +5 yuan/mt above the SMM average price in the morning. Due to weak off-season demand, market quotes and transactions were mostly concentrated at parity with the SMM average price. On Friday, SMM A00 aluminum was reported at 20,720 yuan/mt, down 50 yuan/mt from the previous trading day, with a premium of 180 yuan/mt against the 07 contract, unchanged from the previous trading day. In central China, due to weekend stockpiling demand, market trading improved slightly in the morning, with spot premiums holding steady. The spot market was at parity with the SMM central China average price, and the price spread with east China held steady. On Friday, SMM central China A00 aluminum was recorded at 20,560 yuan/mt against the SHFE aluminum 2507 contract, down 50 yuan/mt from the previous trading day. The price spread between central China and east China was 160 yuan/mt, unchanged from the previous trading day, with a premium of 20 yuan/mt against the 2507 contract.

Secondary Aluminum Raw Materials: Last Friday, spot primary aluminum prices fell by 50 yuan/mt compared to the previous trading day, with SMM A00 aluminum closing at 20,720 yuan/mt. The overall aluminum scrap market prices pulled back. As the off-season in June progresses halfway, downstream scrap utilization enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. Last Friday, the concentrated quotes for baled UBC aluminum scrap ranged from 15,350-15,850 yuan/mt (tax excluded), while shredded aluminum tense scrap quotes were concentrated at 15,800-17,300 yuan/mt (tax-exclusive prices). Regionally, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminum price movements, with price adjustments ranging from 50-100 yuan/mt. In Henan, Foshan, Guizhou, and other regions, price adjustments lagged behind aluminum price movements, with prices remaining flat MoM. By product, both baled UBC and shredded aluminum tense scrap prices pulled back by 100 yuan/mt MoM. Considering the difficulty in actual shipments, aluminum scrap suppliers adopted a cautious wait-and-see attitude towards price adjustments amidst aluminum prices fluctuating at highs.

Secondary Aluminum Alloy: Last Friday, SMM A00 aluminum prices fell by 50 yuan/mt from the previous trading day to 20,720 yuan/mt, while domestic SMM ADC12 prices decreased by 50 yuan/mt to 19,900-20,200 yuan/mt. Amidst the continued decline in aluminum prices, market quotes diverged, with some enterprises actively lowering quotes due to sluggish demand, while others remained firm due to cost pressures. Overall, the rigid cost support and weak off-season demand continued to clash, leading to ADC12 prices fluctuating rangebound. As the off-season deepens, it is expected that ADC12 prices will remain in the doldrums in the short term, requiring continuous attention to raw material circulation and marginal fluctuations in off-season demand. In the import market, CIF quotes for imported ADC12 remained stable at $2,420-2,450/mt, while imported spot prices decreased by 100 yuan/mt to around 19,200 yuan/mt, with immediate import losses slightly expanding to the 600 yuan/mt range. Local ADC12 quotes in Thailand remained stable at 82 Thai baht/kg (tax excluded).

Summary: On the macro front, there was a clear divergence in statements from US Fed officials regarding interest rate cuts, with geopolitical conflicts elevating market bullish sentiment. On the fundamental front, domestic primary aluminum operating capacity remained stable, with the proportion of liquid aluminum maintaining high levels, and market casting ingot volumes remaining tight. SMM learned that individual aluminum plants slightly increased casting ingot volumes this week, but it remains difficult to change the overall tight market casting ingot supply. On the demand side, overall, most downstream sectors are in the traditional off-season, with significant production cuts feedback in the downstream sector in central China, weakening local spot transactions, and persistent large discounts in market transaction prices. From the perspective of downstream demand sectors, the weakening off-season demand in the PV and home appliance sectors cannot be ignored, with a significant decline in the operating rates of related sectors. The wire and cable sector experienced a decline in operating rates due to the completion of the previous delivery period and high aluminum prices. In terms of inventory, the destocking pace has slowed, with low inventory still providing support to the futures market, but spot premiums and discounts have gradually pulled back. Overall, the domestic favorable macro environment remains unchanged. On the fundamental side, the low inventory of domestic aluminum ingots provides support for aluminum prices. However, the weakening of downstream demand during the off-season is evident, and spot premiums/discounts may fall back from highs. Going forward, it is necessary to focus on changes in inventory and demand.

[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 to replace their own independent judgment. Any decisions made by clients are not related to SMM.]

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