Minor inventory buildup in social inventory, aluminum price center may decline [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on June 30

Futures Market: On the previous night session, the most-traded SHFE aluminum 2508 contract opened at 20,575 yuan/mt, with a high of 20,620 yuan/mt, a low of 20,555 yuan/mt, and closed at 20,580 yuan/mt, unchanged from the previous close. LME aluminum opened at $2,567.0/mt, with a high of $2,592.5/mt, a low of $2,563.5/mt, and closed at $2,585.0/mt, up 0.72%.

Macro: (1) The Ministry of Commerce will organize the NEV Consumption Season in Thousands of Counties and Towns to continuously unleash potential and accelerate the cultivation of new growth points in automobile consumption. The event will take place from July to December. (Bullish ★) (2) US President Trump stated that he does not believe he needs to extend the July 9 deadline previously set for countries to reach agreements with the US to avoid higher tariffs. (Bearish ★) (3) Trump accused Fed Chairman Jerome Powell of artificially keeping interest rates high and suggested that rates should be half or even lower than their current levels. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of June 30, the aluminum ingot inventory at major domestic consumption areas was 468,000 mt, with an inventory buildup of 5,000 mt compared to last Thursday. (Bearish ★) (2) Last week, the prices of petroleum coke under CNOOC saw a wide-ranging increase, with a rise of 220-520 yuan/mt. The current price range is 3,550-3,850 yuan/mt. Binzhou Petrochemical is still under maintenance and has not provided a quote, while the port quote for Huizhou coke is 3,550 yuan/mt. (Bullish ★) (3) According to SMM's weekly statistics on primary aluminum billet production site inventory, as of June 27, the national primary aluminum billet production site inventory was 113,100 mt, an increase of 5,400 mt or 5% WoW, and an increase of 28,800 mt or 34.2% MoM. The current days of inventories for primary aluminum billets are calculated to be 2.3 days, an increase of 0.1 day WoW and 0.5 day MoM. (Bearish ★)

Primary Aluminum Market: On the morning of last Friday, the center of the front-month SHFE aluminum contract continued the night session's upward trend and fluctuated at highs near 20,700 yuan/mt. In east China, with the decline in processing fees for downstream processed aluminum materials, some enterprises faced losses and gradually entered the rhythm of production cuts. Additionally, due to suppliers' need to recoup funds by mid-year, they began to sell off inventory, and the market saw transactions at a discount of 20-30 yuan/mt against the SMM price. On last Friday, SMM A00 aluminum was reported at 20,890 yuan/mt, up 280 yuan/mt from the previous trading day, with a premium of 100 yuan/mt against the 07 contract, down 30 yuan/mt from the previous trading day. In central China, amid the off-season atmosphere, aluminum processing enterprises increasingly cut production, and the market was mainly dominated by long-term contracts. With aluminum prices fluctuating at highs during the day, downstream processed aluminum material enterprises made few purchases, and suppliers continuously offered discounts, with transactions at a discount of 20-30 yuan/mt against the SMM central China average price. SMM recorded the price of A00 aluminum in central China against the SHFE aluminum 2507 contract at 20,710 yuan/mt, up 260 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -180 yuan/mt, expanding by 20 yuan/mt from the previous trading day, with a discount of 80 yuan/mt against the 2507 contract.

Secondary aluminum raw materials: On Friday last week, the spot price of primary aluminum surged by 280 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,890 yuan/mt, and the overall aluminum scrap market prices followed suit, albeit with limited increases. Amid the traditional off-season, downstream scrap utilization enterprises faced weak order releases and primarily made just-in-time procurements. On Friday last week, the concentrated quotes for baled UBC aluminum scrap ranged from 15,300 to 15,800 yuan/mt (tax-exclusive), while those for shredded aluminum tense scrap ranged from 15,900 to 17,400 yuan/mt (tax-exclusive). By region, Shanghai, Jiangsu, Shandong, Henan, and other places closely followed aluminum price movements, with price adjustments ranging from 200 to 250 yuan/mt. Jiangxi and Foshan, among others, lagged in price adjustments, with adjustments ranging from 100 to 200 yuan/mt depending on the product. By product, baled UBC and shredded aluminum tense scrap prices rose slightly by 100 yuan/mt from the previous day. New wrought aluminum alloy scrap and clean tapping aluminum wire prices increased by 200 yuan/mt from the previous day, closely following the rise in primary aluminum prices. Regarding the price difference between A00 aluminum and aluminum scrap, the price spread between mechanical casting aluminum scrap and A00 aluminum in Shanghai expanded by 8 yuan/mt from the previous day to 1,848 yuan/mt. In Foshan, the price spread between extrusion green scrap and A00 aluminum increased by 180 yuan/mt from the previous day to 1,738 yuan/mt. Considering the difficulty in actual shipments, aluminum scrap suppliers adopted a cautious and wait-and-see attitude towards price adjustments amid the high-level fluctuations of aluminum prices.

Secondary aluminum alloy: On the futures market, the most-traded cast aluminum alloy 2511 futures contract opened at 19,705 yuan/mt on Friday last week, fluctuating upward overall, reaching a high of 19,885 yuan/mt, up 75 yuan/mt from the previous close, with a 0.38% increase. Trading volume was 6,043 lots, and open interest was 8,226 lots, with bulls primarily increasing their positions during the day. In the spot market, the SMM A00 price surged by 280 yuan/mt to 20,890 yuan/mt, while the SMM ADC12 price increased by 100 yuan/mt to 20,000-20,200 yuan/mt. Driven by the rise in aluminum prices, aluminum scrap costs generally increased, and the market had a strong willingness to raise prices. However, overall transactions remained weak, with downstream enterprises primarily making just-in-time procurements. As July approaches, weak growth in terminal orders will continue to suppress the upside room for ADC12 prices. Nevertheless, cost support remains relatively strong, providing a floor for prices. In the short term, with consumption unlikely to improve and the off-season impact deepening, it is expected that ADC12 prices will maintain a narrow fluctuation range. In the import market, the CIF quote for imported ADC12 slightly increased to $2,450-2,470/mt, while the imported spot price rose by 100 yuan/mt to around 19,300 yuan/mt, with an immediate import loss ranging from 700 to 800 yuan/mt. The local tax-exclusive quote for ADC12 in Thailand was concentrated at 82-83 Thai baht/kg.

Summary: Overall, on the macro front, domestic favorable policies continue to intensify with the direction of boosting consumption unchanged; overseas macro conditions remain mixed with persistent risks. On the fundamental side, casting ingot output at aluminum smelters in some regions has increased, compounded by the off-season downstream and fear of high prices, resulting in less-than-ideal market transactions. Aluminum ingot inventory has seen a slight buildup, and spot premiums/discounts have weakened significantly. Aluminum prices are expected to pull back slightly in the short term. Close attention should be paid to casting ingot output and inventory changes going forward.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should exercise caution in decision-making and shall not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]

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