Macro factors are intertwined with both bullish and bearish sentiments, while the fundamentals remain sluggish. It is expected that aluminum prices will fluctuate [SMM Aluminum Morning Meeting Summary]

7.2 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2508 contract opened at 20,610 yuan/mt, with a high of 20,700 yuan/mt, a low of 20,600 yuan/mt, and closed at 20,655 yuan/mt, up 0.1% from the previous close. LME aluminum opened at $2,595.0/mt, with a high of $2,617.0/mt, a low of $2,595.0/mt, and closed at $2,602.0/mt, up 0.17%.

Macro: (1) The Caixin China General Manufacturing PMI for June was 50.4, 2.1 percentage points higher than in May and the same as in April, returning above the critical point. The new orders index rebounded to slightly above the critical point. The production index also returned to expansion territory, hitting a new high in nearly seven months. (Bullish ★) (2) US President Trump stated that he would not consider extending the July 9 deadline for tariff negotiations; it may not be possible to reach an agreement with Japan before July 9; Japan may face tariffs of 30% or 35%; and there are two or three candidates for the position of Fed Chairman. (Bearish ★) (3) Fed Chairman Powell said that if it were not for US President Trump's tariff policies, the Fed would currently be adopting a more accommodative monetary policy. When asked about the possibility of an interest rate cut in July, Powell said that he would not rule out any possibility, which would depend on the data. He stated that the "vast majority" of Fed members do expect another interest rate cut later this year to be appropriate. (Neutral)

Fundamentals: (1) SMM's aluminum ingot inventory in three regions on July 1 showed an inventory buildup of 6,500 mt from the previous trading day, reaching 329,500 mt; aluminum billet inventory in two regions showed an inventory buildup of 200 mt from the previous trading day, reaching 87,200 mt. (Bearish ★) (2) According to foreign media reports, National Aluminium Company Limited (NALCO) of India recently launched a new aluminum alloy product - IA90 grade aluminum alloy ingot, which has higher strength, excellent wear resistance, and corrosion resistance, designed to meet the evolving needs of the automotive industry, particularly in applications such as wheel manufacturing, engine blocks, cylinder heads, and other automotive structural components. (Neutral)

Primary Aluminum Market: Yesterday, during the first trading session of the SHFE aluminum morning market, the price center shifted downward and then oscillated around 20,735 yuan/mt, but the price spread between futures contracts showed a widening trend; the spot market remained sluggish, with premiums continuing to fall across regions. In east China, the market initially offered SMM -30 to -20 yuan/mt premiums in the morning, and then gradually shifted to -30 yuan/mt premiums for transactions. Yesterday, SMM A00 aluminum was reported at 20,780 yuan/mt, unchanged from the previous trading day, with a premium of 40 yuan/mt against the 07 contract, narrowing significantly by 30 yuan/mt from the previous trading day. In the central China market, downstream production cuts and high inventory levels of raw materials and finished products continue to weigh on the market sentiment, leading to sluggish shipments. The spot market spread between SMM central China and east China widened to -220. Yesterday, SMM central China A00 aluminum closed at 20,560 yuan/mt against the SHFE aluminum 2507 futures contract, down 20 yuan/mt from the previous trading day. The spread between Henan and Shanghai was 220 yuan/mt, expanding by 20 yuan/mt from the previous trading day, and trading at a discount of 180 yuan/mt against the 2507 futures contract.

Secondary aluminum raw materials: Yesterday, the spot price of primary aluminum remained unchanged from the previous trading day. SMM A00 aluminum spot closed at 20,780 yuan/mt, and the overall aluminum scrap market prices remained stable. During the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. Yesterday, the mainstream quotations for baled UBC aluminum scrap were concentrated in the range of 15,300-15,800 yuan/mt (tax-exclusive), while shredded aluminum tense scrap quotations were concentrated in the range of 15,800-17,300 yuan/mt (tax-exclusive). By product, baled UBC aluminum scrap prices were adjusted down by 100 yuan/mt MoM from yesterday, but there were also cases where some regions faced difficulties in collecting materials and chose to raise prices against the market trend. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan increased by 20 yuan/mt from last Friday to 1,756 yuan/mt, while the price difference for bare bright aluminum wire in Jiangsu decreased by 273 yuan/mt from last Friday, reverting to a range of 653 yuan/mt. Considering the actual difficulty in shipments, aluminum scrap suppliers are adopting a cautious wait-and-see attitude towards price adjustments amid the high-level fluctuations of aluminum prices. Next week, the aluminum scrap market is expected to continue its high-level fluctuations. Shredded aluminum tense scrap, supported by tight supply, is expected to exhibit strong price resilience and fluctuate rangebound within the 15,800-17,400 yuan/mt range. Baled UBC aluminum scrap, 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 aluminum scrap 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 19,785 yuan/mt, traded narrowly around the 19,750 yuan/mt level in the morning session, and fluctuated upward in the afternoon session, reaching a high of 19,860 yuan/mt before closing at 19,825 yuan/mt, up 25 yuan/mt or 0.13% from the previous close, with a trading volume of 3,098 and an open interest of 8,539, dominated by longs increasing their positions during the day. In the spot market, SMM A00 aluminum prices remained unchanged at 20,780 yuan/mt, while SMM ADC12 price ranges remained stable at 20,000-20,200 yuan/mt. Yesterday, aluminum prices remained stable, and fluctuations in ADC12 raw material prices were limited, with most mainstream quotations remaining unchanged, but actual transactions were sluggish. Entering July, weak growth in downstream orders will continue to suppress the upside room for ADC12 prices. However, strong cost support will provide a floor for prices. In the short term, with consumption unlikely to improve and the off-season impact deepening, ADC12 prices are expected to maintain a narrow fluctuation range. In the import market, the CIF offer for imported ADC12 remained slightly stable at $2,450-2,480/mt, with spot import prices hovering around 19,200 yuan/mt and instant import losses near 800 yuan/mt. Local tax-exclusive ADC12 quotes in Thailand concentrated at THB 82-83/kg.

Summary: On the macro front, domestic favorable policies continue to intensify with unchanged focus on consumption promotion, while overseas macro factors are intertwined with bullish and bearish factors, and risks persist. Fundamentally, casting ingot volumes increased at some aluminum smelters; coupled with off-season for downstream demand and fear of high prices, market transactions remained less than ideal. Aluminum ingot inventory experienced slight buildup, and spot premiums/discounts weakened significantly. Short-term aluminum prices are expected to stay 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 advice for investment research decisions. Clients shall exercise caution in decision-making, avoid substituting independent judgment with this information, and assume all responsibility for decisions made, which are unrelated to SMM.]

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