Amid geopolitical easing and policy games, can the short-term fluctuations in aluminum prices break through inventory pressure? [SMM Weekly Aluminum Price Review]

Overseas geopolitical conflicts have eased, with a ceasefire between Iran and Israel and a reduction in concerns about shipping capacity in the Strait of Hormuz. The support for aluminum cost from the energy crisis has weakened. However, expectations for US Fed interest rate cuts have risen, leading to a further weakening of the US dollar and providing some support for base metals.

Domestically, the central bank and six other departments have launched a 500 billion yuan consumption stimulus policy, focusing on supporting home appliances, car trade-in policies, and green consumption. Additionally, intensified real estate market rescue policies (such as Guangzhou's complete cancellation of purchase restrictions) may indirectly boost demand for construction aluminum, but the effectiveness requires time to verify.

In terms of aluminum supply, domestic operating capacity for electrolytic aluminum has remained stable, but downstream consumption has weakened, leading to a slight increase in casting ingot production. The destocking rate of domestic social inventory has slowed significantly. On the cost side, the real-time cost of electrolytic aluminum decreased slightly by 141 yuan/mt WoW to 16,889 yuan/mt, with domestic aluminum smelters maintaining a high-profit state.

Demand side, downstream industries have entered the traditional off-season, with a significant decline in the operating rates of aluminum wire and cable and extrusion. Aluminum processing enterprises in central China have entered a semi-shutdown state due to losses, with low purchase willingness and spot prices remaining at low levels. Despite the strong resilience of demand in the new energy sector (such as PV and automobiles), PV installation rush demand weakened after June, and home appliance production schedules declined significantly MoM, resulting in insufficient overall demand support.

In terms of inventory, SMM's domestic aluminum ingot inventory decreased slightly by 1,000 mt to 463,000 mt on June 26, with initial signs of inventory buildup pressure. As the off-season deepens and casting ingot production increases, inventory begins to face certain pressure.

Overall, aluminum prices in the coming week will face tests from inventory turning point confirmation and off-season demand pressure, maintaining a fluctuating rangebound or in the doldrums trend in the short term, with certain pressure above the 20,600-20,700 yuan/mt range. Risk alerts: macro aspects still require close attention to the Middle East geopolitical situation, US non-farm payrolls data, and the implementation effects of Chinese policies, which may stabilize aluminum prices and lead to a slight rebound. It is expected that SHFE aluminum will operate within the 20,200-20,600 yuan/mt range, and LME aluminum will fluctuate within the $2,530-$2,600/mt range.

The model predicts that the price range for the most-traded aluminum contract's closing price from this Friday to next Thursday (July 3, 2025) will be [20,105, 21,045], with a price center of 20,530 yuan/mt. The extreme price range is [19,580, 21,570], the normal price range is [19,930, 21,220], and the conservative price range is [20,280, 20,870]. Next week's price trend will be fluctuating rangebound or in the doldrums. The support range is [19,930, 20,280], and the pressure range is [20,870, 21,220].

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