The proportion of liquid aluminum pulls back, and the increase in casting ingot volume may be bearish for aluminum prices [SMM Aluminum Morning Meeting Summary]

7.1 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous night session, the most-traded SHFE aluminum 2508 contract opened at 20,555 yuan/mt, with a high of 20,600 yuan/mt, a low of 20,505 yuan/mt, and closed at 20,590 yuan/mt, up 0.05% from the previous close. LME aluminum opened at $2,594.0/mt, with a high of $2,602.5/mt, a low of $2,588.5/mt, and closed at $2,597.5/mt, up 0.1%.

Macro: (1) According to the National Bureau of Statistics (NBS), in June, China's manufacturing, non-manufacturing, and composite PMIs were 49.7%, 50.5%, and 50.7%, respectively, up 0.2, 0.2, and 0.3 percentage points from the previous month. All three indices rebounded. The PMIs of equipment manufacturing, high-tech manufacturing, and consumer goods industries have been in expansion territory for two consecutive months. (Bullish ★) (2) According to the China Automobile Dealers Association, in June, China's automobile dealer inventory warning index was 56.6%, down 5.7 percentage points YoY and up 3.9 percentage points MoM. The prosperity of the automobile circulation industry has declined. (Bearish ★) (3) On June 29 local time, US President Trump stated that Japan's automotive trade with the US was "unfair" and explicitly indicated that he would not cancel the 25% tariff on imported cars. Japan could import oil or other commodities from the US to pressure Japan into expanding imports of US products and reducing the US trade deficit. (Neutral)

Fundamentals: (1) SMM data showed that in June, the proportion of liquid aluminum in domestic aluminum smelters continued to rise. The industry's proportion of liquid aluminum increased by 0.1 percentage points MoM to 75.8% in June. The increase was smaller than expected at the beginning of the month, mainly due to the high inventory of downstream alloyed products and increased aluminum ingot production at some aluminum smelters in certain regions. It is expected that the proportion of liquid aluminum will show a pullback trend in July. (Bearish ★) (2) On June 30, SHFE aluminum futures warrants recorded 28,730 mt, a decrease of 5,660 mt from the previous trading day. In the most recent week, SHFE aluminum futures warrants decreased by a cumulative 19,692 mt, a decrease of 40.67%. In the most recent month, SHFE aluminum futures warrants decreased by a cumulative 22,388 mt, a decrease of 43.8%. (Bullish ★) (3) According to SMM, starting from July 1, a large alumina refinery in Shandong adjusted the purchase price of 32% ionic membrane liquid caustic soda, reducing it by 15 yuan/mt from the base price of 750 yuan/mt. The ex-factory price under the two-invoice system was 735 yuan/mt (approximately 2,297 yuan/mt converted to 100% concentration). (Bearish ★)

Primary Aluminum Market: Yesterday, due to the slight inventory buildup of aluminum ingots, the price center of SHFE aluminum shifted downward in the morning session. The spot market transactions were dismal. Coupled with the semi-annual period, there was a significant demand for capital repatriation. Suppliers at all levels sold at a discount to the online price, but downstream demand was dismal, resulting in poor transactions. In east China, the market initially offered shipments at a discount of SMM-20 to -10 in the morning, but gradually shifted to a discount of -30 yuan/mt later. Yesterday, SMM A00 aluminum was quoted at 20,780 yuan/mt, down 110 yuan/mt from the previous trading day, with a premium of 70 against the 07 contract, narrowing significantly by 30 yuan/mt from the previous trading day. In the central China market, the morning session still saw large discounts for shipments, but downstream production cuts and high inventory levels of raw materials and finished products led to a sluggish market atmosphere. The spot market was quoted at a discount of SMM central China -20, with the price difference between east China and central China expanding to 200 yuan/mt. Yesterday, SMM central China A00 aluminum was recorded at 20,580 yuan/mt against the SHFE aluminum 2507 contract, down 130 yuan/mt from the previous trading day. The price difference between Henan and Shanghai was 200 yuan/mt, widening by 20 yuan/mt from the previous trading day, with a discount of 130 yuan/mt against the 2507 contract.

Secondary aluminum raw materials: Yesterday, primary aluminum spot prices fell by 100 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,780 yuan/mt. The aluminum scrap market prices generally followed the decline. During the traditional off-season, downstream scrap utilization enterprises faced weak order releases, with procurement mainly driven by just-in-time needs. Yesterday, baled UBC aluminum scrap was concentratedly quoted at 15,400-15,900 yuan/mt (tax not included), while shredded aluminum tense scrap was concentratedly quoted at 15,800-17,300 yuan/mt (tax not included). Regionally, Shanghai, Jiangsu, Shandong, Henan, and other places closely followed aluminum price movements, with price adjustments ranging from 50-100 yuan/mt. In terms of products, the price adjustments of baled UBC and shredded aluminum tense scrap moved in opposite directions, with shredded aluminum tense scrap prices decreasing by 100 yuan/mt from last Friday on a WoW basis. Considering the actual difficulty in shipments, aluminum scrap suppliers adopted a cautious wait-and-see attitude amid the high-level fluctuations of aluminum prices. Next week, the aluminum scrap market is expected to continue its high-level fluctuations. Supported by tight supply, shredded aluminum tense scrap prices are expected to remain resilient, fluctuating rangebound within the 15,800-17,400 yuan/mt range. Baled UBC, on the other hand, will observe aluminum price trends and the degree of market supply tightness. The author believes that under the current off-season background, baled UBC will still fluctuate at highs, but the upside room will be limited.

Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy 2511 futures contract opened at 19,835 yuan/mt. After a high opening in the morning session, it fluctuated downward, reaching a low of 19,715 yuan/mt during the session, before stabilizing and rebounding, eventually closing at 19,800 yuan/mt, up slightly by 0.05%, with a trading volume of 2,740 and an open interest of 8,279, dominated by bulls increasing their positions during the day. In the spot market, the SMM A00 price fell sharply by 110 yuan/mt to 20,780 yuan/mt, while the SMM ADC12 price remained stable at 20,000-20,200 yuan/mt. Affected by the overall weakness of aluminum prices, the secondary aluminum market generally adopted a cautious wait-and-see attitude, with little willingness to adjust quotes. However, downstream demand remained sluggish, with downstream enterprises maintaining just-in-time procurement, and market trading activity remained low. Entering July, sluggish growth in terminal orders will continue to suppress the upside room for ADC12 prices. However, cost support remains relatively firm, providing a floor for prices. Short-term consumption is unlikely to improve, and with the off-season impact deepening, ADC12 prices are expected to fluctuate rangebound. In the import market, CIF quotes for imported ADC12 have risen slightly to $2,450-2,480/mt, while import spot prices have decreased by 100 yuan/mt to around 19,200 yuan/mt, widening immediate import losses. Local tax-excluded quotes for Thailand's domestic ADC12 are concentrated at 82-83 baht/kg.

Summary: Overall, on the macro front, domestic favorable policies continue to strengthen with unchanged direction to boost consumption; overseas macro factors remain mixed with persistent risks. On the fundamentals side, casting ingot volumes from aluminum smelters in some regions have increased, coupled with downstream off-season pressures and fear of high prices, making market transactions far from ideal. Aluminum ingot inventory has seen a slight buildup, and spot premiums/discounts have weakened significantly. Short-term aluminum prices are expected to remain in the doldrums. Subsequent attention should focus on casting ingot volumes and inventory changes.

[The information provided is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should exercise caution in decision-making, avoid relying solely on this information instead of independent judgment, and SMM bears no responsibility for any decisions made by clients.]

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