Triple pressures suppress aluminum prices, while low inventory supports intensified market competition [SMM Aluminum Morning Meeting Summary]

7.7 SMM Aluminum Morning Meeting Summary

Futures Market: On Friday, the most-traded SHFE aluminum 2508 contract opened at 20,595 yuan/mt, with a high of 20,625 yuan/mt, a low of 20,540 yuan/mt, and closed at 20,545 yuan/mt. The trading volume was 49,000 lots, and the open interest was 267,000 lots. On the same day, LME aluminum opened at $2,600/mt, with a high of $2,608.5/mt, a low of $2,582/mt, and closed at $2,597.5/mt.

Macro: (1) US President Trump stated that he plans to impose tariffs ranging from 60% to 70% and from 10% to 20% on different countries. These tariffs will begin to be paid by countries on August 1. (Bearish★) (2) US Treasury Secretary Bessent said that a deadlock has emerged in the final stage of trade negotiations, and the next 72 hours will be very busy in terms of trade negotiations; several major announcements may be made in the coming days. (Neutral★) (3) Data from the China Federation of Logistics and Purchasing showed that the global manufacturing PMI in June was 49.5%, up 0.3 percentage points MoM, rising for two consecutive months MoM. The data showed that the index remained in contraction territory, but it rose slightly for two consecutive months, reflecting a slight rebound in the global economic recovery. (Bullish★)

Fundamentals: (1) According to SMM statistics, as of July 7, the inventory of primary aluminum ingots in major domestic consumption areas was 478,000 mt, an increase of 4,000 mt from Thursday last week and an increase of 10,000 mt from Monday last week. (Bearish★) (2) According to SMM statistics, as of July 7, the inventory of aluminum ingots in Guangdong was 144,000 mt; the inventory of aluminum ingots in Wuxi was 120,000 mt; the inventory of aluminum ingots in Gongyi was 72,000 mt. The total inventory in these three areas was 336,000 mt, unchanged from Thursday last week. (Neutral★)

Primary Aluminum Market: On Friday morning, the SHFE aluminum futures market continued to hover at highs. Near the 10:15 closing, the futures market fell rapidly, eventually closing at 20,790 yuan/mt. In the spot market of major consumption areas in the morning, transactions improved slightly as the weekend approached, but prices were generally traded at a discount to SMM. There was no significant improvement in downstream demand. Specifically, in east China, the market continued to offer at a discount of -20 to -10 yuan/mt against SMM in the morning. Overall downstream purchase willingness remained weak, and transactions gradually shifted from SMM-10 to SMM-20. On Friday, SMM A00 aluminum was reported at 20,770 yuan/mt, down 90 yuan/mt from the previous trading day, with a discount of 20 yuan/mt against the 07 contract, expanding by 10 yuan/mt from the previous trading day. In the central China market, spot discounts improved slightly today, mainly due to weekend stockpiling and purchasing by downstream enterprises. Today, the spot market was traded at a premium of +20 and +30 yuan/mt against SMM central China, with the price spread against east China narrowing to -150 yuan/mt. On Friday, SMM central China A00 aluminum was recorded at 20,620 yuan/mt against the SHFE aluminum 2507 contract, down 60 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was 150 yuan/mt, narrowing by 20 yuan/mt from the previous trading day, with a discount of 170 yuan/mt against the 2507 contract.

Secondary Aluminum Raw Materials: On Friday last week, the spot price of primary aluminum fell by 90 yuan/mt compared to the previous trading day. SMM A00 spot aluminum closed at 20,770 yuan/mt, and the overall market price of aluminum scrap declined slightly. Currently in the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. On Friday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,300 to 15,800 yuan/mt (tax-exclusive), while the quoted price for shredded aluminum tense scrap ranged from 15,800 to 17,300 yuan/mt (tax-exclusive). By product, baled UBC aluminum scrap prices fell by 50 yuan/mt MoM, following the decline in aluminum prices. By region, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminum price movements, with price adjustments ranging from 50 to 100 yuan/mt. In contrast, Jiangxi, Foshan, Guizhou, Hunan, and other regions lagged behind aluminum price movements, with quoted prices remaining unchanged from the previous trading day. 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 narrowed by 90 yuan/mt MoM to 1,767 yuan/mt, while the price difference between mechanical casting aluminum scrap and A00 aluminum in Shanghai contracted by 10 yuan/mt MoM to 1,836 yuan/mt.

Secondary Aluminum Alloy: On the futures market, the most-traded cast aluminum alloy futures contract 2511 opened at 19,950 yuan/mt on Friday last week, reaching a high of 19,965 yuan/mt and a low of 19,825 yuan/mt, before closing at 19,885 yuan/mt, down 80 yuan/mt or 0.40% from the previous close, with a trading volume of 3,705 and an open interest of 9,250. Bulls mainly reduced their positions during the day. In the spot market, SMM A00 aluminum prices fell by 90 yuan/mt from the previous day to 20,770 yuan/mt, while SMM ADC12 prices remained stable within the range of 20,000 to 20,200 yuan/mt. Entering July, factors such as the high-temperature off-season and high aluminum prices have continued to impact downstream orders, with some downstream enterprises initiating production cuts. Despite active inquiries from futures and spot traders and an increase in trading volume for delivery brands during the week, the end-use consumption market remains sluggish, posing a key resistance to price increases. Faced with a dual squeeze of raw material supply deficits and weak market demand, some secondary aluminum alloy manufacturers have temporarily halted furnace operations for maintenance or reduced their operating rates. Overall, in the absence of substantial demand improvements, prices encounter resistance, but the cost support logic remains intact. It is expected that secondary aluminum alloy prices will maintain a narrow rangebound fluctuation in the short term. In the import market, the CIF quoted price for imported ADC12 remained stable at 2,450 to 2,480 US dollars/mt, with the imported spot price hovering around 19,200 yuan/mt and the immediate import loss around 800 yuan/mt. In Thailand, the local tax-exclusive quoted price for ADC12 is concentrated within the range of 82-83 Thai baht/kg.

Summary: On the macro front, Trump's plan to impose tariffs of up to 70% on multiple countries, coupled with the stalemate in trade negotiations, has heightened market risk aversion, further pressuring aluminum prices. Although the continuous rebound in the global manufacturing PMI indicates economic resilience, the index remains in contraction territory, providing limited support. Fundamentals: In some regions, aluminum smelters increased casting ingot production. As downstream sectors entered the off-season in July, coupled with persistently high aluminum prices further suppressing operational performance, spot market transactions were less than ideal. Aluminum ingot inventory continued to build up consecutively, spot premiums/discounts weakened significantly, and real-time costs for electrolytic aluminum continued to decline MoM. Comprehensive analysis indicates that while current low inventory still supports aluminum prices, the short-term outlook faces heightened downside risks at high price levels due to threefold pressures from inventory buildup expectations, weakening consumption, and macro uncertainties. Limited upside potential remains, necessitating close monitoring of casting ingot volumes and inventory changes in subsequent periods.

[The provided information is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should exercise caution in decision-making, avoid substituting independent judgment with this content, and SMM bears no responsibility for any client decisions.]

》Click to view SMM aluminum industry chain database

》Subscribe to view SMM metal spot historical prices