Middle East ceasefire eases geopolitical risks; short-term bearish factors dominate, with aluminum prices in the doldrums [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on June 25

Futures Market: Last night, the most-traded SHFE aluminum 2508 contract opened at 20,300 yuan/mt, with a high of 20,310 yuan/mt, a low of 20,240 yuan/mt, and closed at 20,270 yuan/mt. The trading volume was 40,000 lots, and the open interest was 251,000 lots. Last night, LME aluminum opened at $2,569.5/mt, with a high of $2,570.5/mt, a low of $2,556/mt, and closed at $2,559/mt.

Macro: (1) Israel and Iran have agreed to a comprehensive ceasefire! The Supreme National Security Council of Iran issued a statement announcing a ceasefire with "Israel and its supporters." (Bearish ★) (2) Fed Chairman Powell stated in his congressional testimony that the Fed is currently in a favorable position to be patient and wait for a clearer understanding of the economic trajectory before considering adjusting its monetary policy stance. However, he did not rule out the possibility that the impact of tariffs on inflation might be less than expected or the possibility of an earlier interest rate cut. US President Trump again called on Powell, stating that the Fed should cut interest rates by at least 2 to 3 percentage points. (Neutral ★) (3) The central bank and six other departments jointly issued the "Guidance on Financial Support for Boosting and Expanding Consumption," proposing 19 key measures in six aspects: supporting the enhancement of consumption capacity, expanding financial supply in the consumption sector, tapping and releasing residents' consumption potential, promoting the improvement of consumption supply efficiency, optimizing the consumption environment, and ensuring policy support. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of June 24, the inventory of aluminum ingots in Guangdong was 154,000 mt; in Wuxi, it was 109,000 mt; and in Gongyi, it was 65,000 mt. The total inventory in these three locations was 328,000 mt, an increase of 4,000 mt from the previous trading day. (Bearish ★) (2) According to SMM statistics, regarding the inventory of aluminum billets in two domestic locations, the inventory of aluminum billets in Guangdong was 64,200 mt, and in Wuxi, it was 19,500 mt, totaling 84,000 mt, a decrease of 200 mt MoM. (Bearish ★) (3) According to the latest data from the General Administration of Customs, from January to May 2025, China's cumulative imports of unwrought aluminum and aluminum semis were 1.67 million mt, down 6.9% YoY. Among them, the imports of unwrought aluminum and aluminum semis in May were 350,000 mt, up 14.7% YoY and down 5.4% MoM. (Neutral ★)

Primary Aluminum Market: Yesterday morning, the center of the front-month SHFE aluminum contract fell to around 20,350 yuan/mt. The futures market pulled back slightly, and market inquiries increased, but actual transactions still revolved around long-term contracts. The spot market was relatively sluggish, with transactions occurring at a discount of 10 yuan/mt against SMM. Yesterday, SMM A00 aluminum was reported at 20,540 yuan/mt, down 110 yuan/mt from the previous trading day, and at a premium of 150 yuan/mt against the 07 contract, down 10 yuan/mt from the previous trading day. In the central China market, under the off-season atmosphere, aluminum processing enterprises are increasingly cutting production. The market is mainly dominated by long-term contract transactions, with few spot orders being concluded. During the day, the center of aluminum prices fell. Processing material enterprises saw a slight increase in just-in-time procurement, but the volume was limited. The market concluded transactions at a discount of 20 yuan/mt against the SMM average price. SMM A00 aluminum in central China against the SHFE aluminum 2507 contract was recorded at 20,360 yuan/mt, down 110 yuan/mt from the previous trading day. The price difference between Henan and Shanghai was -180 yuan/mt, unchanged from the previous trading day, and it was at a discount of 30 yuan/mt against the 2507 contract.

Secondary aluminum raw materials: Yesterday, spot primary aluminum prices fell by 110 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,540 yuan/mt, and the overall aluminum scrap market prices pulled back. During the traditional off-season, downstream scrap utilization enterprises have weak order releases, with procurement mainly driven by just-in-time needs. Yesterday, the concentrated quotes for baled UBC aluminum scrap were in the range of 15,200-15,700 yuan/mt (tax not included), and the concentrated quotes for shredded aluminum tense scrap were in the range of 15,800-17,300 yuan/mt (tax not included). By region, Shanghai, Jiangsu, Shandong, and other places closely followed aluminum price movements, with price adjustments in the range of 50-100 yuan/mt. Jiangxi region showed a clear attitude of refusing to budge on prices, with no price adjustments occurring for three consecutive trading days. By product, since last Thursday, baled UBC has followed the downward trend of aluminum prices, with a cumulative adjustment of 150-200 yuan/mt. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 35 yuan/mt from last Wednesday to 1,823 yuan/mt, and the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed by 112 yuan/mt from last Wednesday to 1,486 yuan/mt.

Secondary aluminum alloy: In the spot market, the SMM ADC12 price remained stable at 19,900-20,100 yuan/mt yesterday. Suppressed by the traditional off-season, demand side performance was weak, and market transactions were sluggish. The lack of growth in terminal orders inhibited the upward movement of ADC12 prices, compounded by the impact of low-priced supply, intensifying market competition. However, the cost side was relatively firm, providing some support to prices. It is expected that under the deepening impact of the off-season, ADC12 prices will remain in the doldrums in the short term, and close attention should be paid to changes in raw material circulation and signs of marginal improvement in demand. In the import market, the CIF quotes for imported ADC12 remained in the range of $2,430-2,470/mt, and the imported spot price remained around 19,200 yuan/mt, with the instantaneous loss from imports still in the range of 700-800 yuan/mt. The local tax-not-included quotes for ADC12 in Thailand were concentrated at 82-83 Thai baht/kg.

Summary: On the macro front, the ceasefire between Israel and Iran has alleviated geopolitical risks, reducing the demand for capital risk aversion, which is short-term bearish for aluminum prices. US Fed Chair Powell's neutral stance, coupled with potential interest rate cut expectations and pressure from Trump, may boost the economy, providing support to aluminum prices. The PBOC and six other departments jointly issued a document to stimulate consumption, which is bullish for terminal aluminum demand. On the fundamental side, the operating capacity of domestic electrolytic aluminum remained stable, with the proportion of liquid aluminum staying high, and the market supply of casting ingots remained tight. Demand side, overall, most downstream sectors were in the traditional off-season. Feedback on production cuts in the downstream sector in central China was evident, with weak spot cargo transactions and a continuous large discount in market transaction prices. The weakening off-season demand in the PV and home appliance sectors cannot be ignored, with a significant pullback 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 cycle and high aluminum prices. Inventory side, the destocking rate slowed, and low inventory levels still provided support to the futures market. On Monday this week, inventory buildup was observed, and it is necessary to monitor whether the inflection point of destocking has officially formed. However, spot premiums/discounts gradually pulled back. Overall, in the short term, aluminum prices are under pressure from inventory accumulation and easing geopolitical tensions. However, medium-term macro policies (such as domestic consumption stimulus and expectations for US Fed interest rate cuts) may boost demand. It is expected that aluminum prices will be in the doldrums in the short term, and subsequent focus should be on changes in inventory and demand.

 [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 solely on this information, as any decisions made by clients are unrelated to SMM.]

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