Inventory buildup of aluminum ingots, aluminum prices fluctuating [SMM Aluminum Morning Meeting Summary]

7.3 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2508 contract opened at 20,715 yuan/mt, with a high of 20,735 yuan/mt, a low of 20,690 yuan/mt, and closed at 20,695 yuan/mt, down 0.1% from the previous close. LME aluminum opened at $2,602.0/mt, with a high of $2,624.5/mt, a low of $2,587.0/mt, and closed at $2,614.5/mt, up 0.48%.

Macro: (1) Zhang Guoqing, Vice Premier of the State Council, recently conducted a survey in Hubei on the transformation, upgrading, and innovative development of the manufacturing sector. He emphasized the need to focus on the real economy for economic development, advance new industrialization, and promote high-end, intelligent, and green development of the manufacturing sector. (Neutral) (2) The National Development and Reform Commission (NDRC) recently allocated over 300 billion yuan to support the third batch of "implement major national strategies and build up security capacity in key areas" construction projects in 2025. With this, the list of 800 billion yuan "implement major national strategies and build up security capacity in key areas" construction projects for this year has been fully issued. (Bullish★)

Fundamentals: (1) SMM aluminum ingot inventory on July 1st showed an inventory buildup of 6,000 mt compared to Monday, reaching 474,000 mt. (Bearish★) (2) According to SMM statistics, domestic aluminum billet inventory in two regions: aluminum billet inventory in Guangdong was 69,300 mt, and aluminum billet inventory in Wuxi was 21,500 mt, totaling 90,800 mt, up 3,600 mt MoM. (Bearish★)

Primary Aluminum Market: Yesterday, SHFE aluminum opened strong in the morning session and fluctuated at highs. As the first trading session neared its end, the futures market pulled back, closing at 20,800 yuan/mt. The spot market remained sluggish in the morning, with insufficient purchase willingness from downstream buyers. As futures prices rose, many regions saw transactions at a discount to SMM prices. Specifically, in east China, the market still offered at a discount of -30 to -20 yuan/mt against SMM prices in the early morning, with poor purchase willingness from downstream buyers. Most transactions were executed under long-term contracts, and spot premiums narrowed significantly by 30 yuan/mt to 10 yuan/mt. Yesterday, SMM A00 aluminum was reported at 20,810 yuan/mt, up 30 yuan/mt from the previous trading day, with a premium of 10 against the 07 contract, narrowing by 30 yuan/mt from the previous trading day. In central China yesterday, the spot market saw transactions at a discount of -10 to parity against SMM central China prices, with the price spread against east China narrowing to -200. Yesterday, SMM central China A00 aluminum was recorded at 20,610 yuan/mt against the SHFE aluminum 2507 contract, up 50 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was 200 yuan/mt, narrowing by 20 yuan/mt from the previous trading day, with a discount of 190 yuan/mt against the 2507 contract.

Secondary Aluminum Raw Materials: Yesterday, the spot price of primary aluminum rose by 30 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,810 yuan/mt. The aluminum scrap market prices remained stable overall. In the current traditional off-season, downstream scrap utilization enterprises have weak order releases and mainly purchase based on immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap was 15,300-15,800 yuan/mt (tax-exclusive), while the centralized quoted price for shredded aluminum tense scrap was 15,800-17,300 yuan/mt (tax-exclusive price). Regarding 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 40 yuan/mt from yesterday to 1,797 yuan/mt, while the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai decreased by 24 yuan/mt from yesterday to 1,823 yuan/mt. Considering the difficulty in actual shipments, aluminum scrap suppliers adopted a cautious wait-and-see attitude towards price adjustments amid the high-level fluctuation of aluminum prices. This week, the aluminum scrap market will continue to exhibit a high-level fluctuation pattern. Supported by tight supply, shredded aluminum tense scrap prices have shown strong resilience and are expected to fluctuate rangebound within the 15,800-17,400 yuan/mt range. Baled UBC, on the one hand, observes the aluminum price trend, and on the other hand, pays attention to the degree of market supply shortage. The author believes that under the current off-season background, baled UBC will still fluctuate at highs, but the upside room is relatively limited.

Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy futures contract 2511 opened at 19,830 yuan/mt, with the futures market fluctuating higher overall, reaching a low of 19,810 yuan/mt, touching a high of 19,860 yuan/mt in the afternoon, and finally closing at 19,945 yuan/mt, up 60 yuan/mt from the previous close, with a gain of 0.30%. The trading volume was 5,305, and the open interest was 8,930, with bulls increasing their positions mainly during the day. In the spot market, the SMM A00 aluminum price increased by 30 yuan/mt from the previous day to 20,810 yuan/mt, while the SMM ADC12 price range remained stable at 20,000-20,200 yuan/mt. Although aluminum prices rose slightly yesterday, the secondary aluminum market struggled to catch up, with quoted prices generally remaining stable. Currently, the circulation of aluminum scrap is tightening, increasing the difficulty for enterprises to procure raw materials. The off-season effect on the demand side is prominent, with some downstream enterprises beginning to reduce production due to high temperatures or a decline in orders, resulting in sluggish market transactions. Subject to the dual pressures of insufficient raw material supply and weakening demand, some secondary aluminum smelters have already experienced short-term furnace shutdowns for maintenance or reduced their operating rates. Overall, under the combined influence of the deepening off-season effect and cost support, it is expected that the ADC12 price will maintain a rangebound fluctuation pattern. In the import market, the CIF quoted price for imported ADC12 remained at 2,450-2,480 US dollars/mt, with the imported spot price hovering around 19,200 yuan/mt and the immediate import loss hovering around 800 yuan/mt. The local tax-exclusive quoted price for ADC12 in Thailand was concentrated at 82-83 Thai baht/kg.

Summary: Overall, in terms of macro factors, domestic favorable policies continue to be strengthened, promoting the direction of consumption unchanged. Overseas macro factors are mixed, with risks still present. On the fundamental side, the casting ingot volume of aluminum smelters in some regions has increased, coupled with the off-season effect on the downstream side and fear of high prices, making market transactions less than ideal. Aluminum ingot inventory has slightly built up, and spot premiums/discounts have weakened significantly. It is expected that aluminum prices will fluctuate in the doldrums in the short term. Follow-up attention should be paid to 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 should make prudent decisions and should not replace independent judgments with this. Any decisions made by clients are unrelated to SMM.]

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