Domestic consumption boosting policies intensify, aluminum prices face upward pressure in the short term [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on June 27

Futures Market: Last night, the most-traded SHFE aluminum 2508 contract opened at 20,490 yuan/mt, with a high of 20,660 yuan/mt, a low of 20,470 yuan/mt, and closed at 20,660 yuan/mt. Trading volume was 106,000 lots, and open interest was 272,000 lots. Last night, LME aluminum opened at $2,580/mt, with a high of $2,587.5/mt, a low of $2,580/mt, and closed at $2,585.5/mt.

Macro: (1) The National Development and Reform Commission (NDRC) held a press conference, introducing that the third batch of trade-in funds for consumer goods this year would be allocated in July. With the accelerated implementation of existing policies and the introduction of new reserve policies, there is confidence and capability to minimize the uncertainties and adverse impacts of external shocks and promote sustained and healthy economic development. (Bullish ★) (2) The EU is considering reducing tariffs on a range of US imports in hopes of quickly reaching a trade agreement with President Trump. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of June 26, the aluminum billet inventory in major domestic consumption areas was 142,500 mt, a decrease of 2,000 mt from Monday and an increase of 8,000 mt WoW from Thursday. (Bearish ★) (2) According to SMM statistics, as of June 26, the primary aluminum ingot inventory in major domestic consumption areas was 463,000 mt, a decrease of 1,000 mt from the previous Monday and an increase of 14,000 mt WoW from Thursday. (Bearish ★)

Primary Aluminum Market: Yesterday morning, the center of the front-month SHFE aluminum contract climbed slightly above 20,400 yuan/mt. Selling was still the main theme in east China. 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 at a discount of 10 yuan/mt against the SMM average price. Yesterday, SMM A00 aluminum was reported at 20,530 yuan/mt, down 10 yuan/mt from the previous trading day, with a premium of 140 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 increasingly cut production, and the market was mainly dominated by long-term contracts. However, with the expansion of discounts in the central China region in the early stage, some goods were transferred to Shandong, Hebei, Jiangsu, and other places. Spot premiums in the local market recovered somewhat, with transactions at the SMM average price. SMM central China A00 aluminum was recorded at 20,360 yuan/mt against the SHFE aluminum 2507 contract, unchanged from the previous trading day. The price spread between central China 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, spot primary aluminum rose by 80 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,610 yuan/mt, and aluminum scrap market prices remained generally unchanged from yesterday. In the traditional off-season, downstream scrap utilization enterprises have weak order releases, and procurement is mainly based on just-in-time needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap was 15,200-15,700 yuan/mt (tax not included), while the centralized quoted price for shredded aluminum tense scrap was 15,800-17,300 yuan/mt (tax not included). By region, Shanghai, Jiangsu, Shandong, and other places closely followed aluminum price trends, with price adjustments ranging from 0-50 yuan/mt. Jiangxi province maintained a clear stance of refusing to budge on prices, with no price adjustments observed this week. By product, 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. 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 remained unchanged at 1,840 yuan/mt, while the price difference between A00 aluminum and green shredded aluminum tense scrap in Foshan increased by 70 yuan/mt from yesterday to reach 1,557 yuan/mt. Considering the difficulty in actual shipments, aluminum scrap suppliers adopted a cautious and wait-and-see attitude towards price adjustments amid the highs and fluctuations of aluminum prices. Next week, the aluminum scrap market is expected to continue its pattern of fluctuating at highs.

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 traditional off-season, demand remained weak, and market transactions were sluggish. The lack of growth in terminal orders inhibited the upward movement of ADC12 prices, while the impact of low-priced goods exacerbated market competition. However, the cost side remained relatively firm, providing some support for prices. With short-term consumption unlikely to improve and the deepening impact of the off-season, it is expected that ADC12 prices will remain in the doldrums. Attention should be paid to changes in raw material circulation and signs of marginal improvement in demand. In the import market, the CIF quoted price for imported ADC12 remained at 2,430-2,470 US dollars/mt, while the imported spot price remained around 19,200 yuan/mt, with immediate import losses still in the range of 700-800 yuan/mt. The local quoted price for ADC12 in Thailand (tax not included) was concentrated at 82-83 Thai baht/kg.

Summary: On the macro front, domestic policy efforts have boosted demand, and the issuance of trade-in funds has helped enhance the resilience of aluminum consumption. Overseas, if the EU reduces tariffs on US goods to reach a trade agreement, it may alleviate trade conflicts and reduce the risk of supply chain disruptions, indirectly supporting aluminum prices. On the demand side, downstream industries have entered the traditional off-season, with operating rates for aluminum wire and cable, extrusions, etc., declining significantly. Aluminum processing enterprises in central China have experienced semi-shutdown due to losses, with low purchase willingness and spot prices remaining at lows. Despite the strong resilience of demand in the new energy sector (such as PV and automotive), the demand for PV installation rush has weakened after June, and the production schedule for home appliances has declined significantly MoM, resulting in insufficient overall demand support. In terms of inventory, on June 26th, SMM's domestic aluminum ingot inventory slightly decreased by 1,000 mt to 463,000 mt, with initial signs of inventory buildup pressure. With the deepening of the consumption off-season and the increase in casting ingot volumes, inventory began to face certain pressure. Overall, aluminum prices will face tests from inventory turning point confirmation and off-season demand pressure in the coming week, and are expected to fluctuate at highs in the short term.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Customers should make decisions cautiously and should not use this to replace their independent judgment. Any decisions made by customers are not related to SMM]

》Click to view SMM Aluminum Industry Chain Database

》Subscribe to view SMM Spot Metal Historical Prices