Social inventory of aluminum ingots remains at low levels, with aluminum prices fluctuating at highs [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on June 26

Futures Market: Last night, the most-traded SHFE aluminum 2508 contract opened at 20,340 yuan/mt, with a high of 20,380 yuan/mt, a low of 20,325 yuan/mt, and closed at 20,345 yuan/mt. Trading volume was 42,000 lots, and open interest was 253,000 lots. Last night, LME aluminum opened at $2,567/mt, with a high of $2,569/mt, a low of $2,565/mt, and closed at $2,566/mt.

Macro: (1) On Wednesday, as Trump announced that the US would hold talks with Iran next week, risk-aversion sentiment eased, and the market generally expected the US Fed to soon resume its interest rate cut cycle. The US dollar index ultimately closed down 0.27% at 97.71 points. The benchmark 10-year US Treasury yield closed at 4.2920%, and the 2-year US Treasury yield closed at 3.7930%. (Bearish ★) (2) Fed Chairman Powell stated that there is currently a high degree of uncertainty in the economic situation, and he hopes to rely on actual data rather than making overly confident predictions. He does not want to provide excessive forward guidance. The US economy is performing better than other countries, which means interest rates will be higher than in other countries. At some point, the Fed will resume interest rate cuts. (Neutral ★) (3) As the deadline set by US President Trump for re-imposing "reciprocal" tariffs on July 9 approaches, EU leadership is on high alert. The EU has stated that if Trump maintains the basic tariffs on EU goods, the EU plans to impose retaliatory tariffs on US products, with the civil aviation sector being the first to be affected. (Bearish ★)

Fundamentals: (1) According to SMM statistics, as of June 26, the inventory of electrolytic aluminum ingots in major domestic consumption areas was 463,000 mt, an increase of 14,000 mt from last Thursday and a decrease of 1,000 mt from Monday. (Bullish ★) (2) According to SMM statistics, as of June 25, the aluminum ingot inventory in Guangdong was 150,000 mt; in Wuxi, it was 113,000 mt; and in Gongyi, it was 63,000 mt. The total inventory in these three regions was 326,000 mt, a decrease of 500 mt from the previous trading day. (Bullish ★)

Primary Aluminum Market: Yesterday morning, the center of the front-month SHFE aluminum contract climbed slightly above 20,400 yuan/mt. In east China, selling remained the main theme. With the arrival of goods from south China and other regions in the early stage, the off-season atmosphere became more pronounced. Spot premiums were weak during the day, with transactions occurring at a discount of 10 yuan/mt against the SMM average price. Yesterday, SMM A00 aluminum was reported at 20,530 yuan/mt, a decrease of 10 yuan/mt from the previous trading day, with a premium of 140 yuan/mt against the 07 contract, a decrease of 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, and the market is basically dominated by long-term contract transactions. However, as discounts in central China expanded earlier, some supplies were redirected to Shandong, Hebei, Jiangsu, and other regions. The spot market premiums in the local area recovered somewhat, with transactions concluded at the SMM average price. SMM A00 in central China recorded a price of 20,360 yuan/mt against the SHFE aluminum 2507 contract, unchanged from the previous trading day. The price difference between Henan and Shanghai was -170 yuan/mt, narrowing by 10 yuan/mt from the previous trading day, with a discount of 30 yuan/mt against the 2507 contract.

Secondary aluminum raw materials: Yesterday, the spot price of primary aluminum fell by 10 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,530 yuan/mt, with aluminum scrap market prices generally unchanged from the previous day. Amid the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,200 to 15,700 yuan/mt (tax-exclusive), while the quoted price for shredded aluminum tense scrap ranged from 15,800 to 17,300 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminum price movements, with price adjustments ranging from 0 to 50 yuan/mt. Jiangxi province showed a clear stance of refusing to budge on prices, with no price adjustments observed this week. In terms of products, since last Thursday, baled UBC aluminum scrap has followed the downward trend of aluminum prices, with a cumulative price reduction of 150-200 yuan/mt. Considering the actual difficulty in shipping goods, aluminum scrap suppliers have adopted a cautious and wait-and-see attitude towards price adjustments amid the high-level fluctuations of aluminum prices.

Secondary aluminum alloy: In the spot market, the SMM ADC12 price continued to stabilize at 19,900-20,100 yuan/mt yesterday. Suppressed by the ongoing traditional off-season, demand-side performance remained weak, with sluggish market transactions. The lack of growth in terminal orders has constrained the upward movement of ADC12 prices, exacerbated by the impact of low-priced supplies intensifying market competition. However, the cost side remained relatively firm, providing some support to prices. With short-term consumption unlikely to improve and the off-season effects deepening, it is expected that ADC12 prices will remain in the doldrums. Close attention should be paid to changes in raw material circulation and signs of marginal improvement in demand. In the import market, the CIF price of imported ADC12 remained at 2430-2470 US dollars/mt, with the imported spot price hovering around 19,200 yuan/mt, and the immediate import loss still within the 700-800 yuan/mt range. The local tax-exclusive quoted price for ADC12 in Thailand was concentrated at 82-83 Thai baht/kg.

Summary: On the macro front, the marginal easing of the Middle East situation, coupled with the alleviation of concerns over the shipping capacity of the Strait of Hormuz, has raised hopes for the resolution of the energy crisis, thereby weakening the cost support for electrolytic aluminum. The intensification of trade frictions between Europe and the United States may suppress global industrial product demand, dampening expectations for aluminum semis exports. On the fundamental front, domestic electrolytic aluminum operating capacity remained stable, with the proportion of liquid aluminum maintaining a high level, and the market supply of casting ingots remaining tight. On the demand side, overall, most downstream sectors are in the traditional off-season, with significant feedback on production cuts from downstream enterprises in central China. Local spot transactions have weakened, with sustained large discounts appearing in market transaction prices. The weakening of off-season demand in the PV and home appliance sectors cannot be ignored, with a noticeable decline in the operating rates of related sectors. The cable sector has experienced a decline in operating rates due to the completion of the previous delivery period and high aluminum prices. Inventory side, as of Thursday this week, there was no further replenishment of inventory, and it is necessary to continuously observe whether the destocking inflection point has officially formed. Overall, the latest social inventory of aluminum ingots has not shown further inventory buildup and remains at a low level, still providing support to the futures market. In the 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 mainly fluctuate at highs 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 on this to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.]

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