Aluminum prices are supported by destocking in the short term, while macro factors intensify the medium-term volatile pattern [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on July 10

Futures Market: Last night, the most-traded SHFE aluminum 2508 contract opened at 20,520 yuan/mt, with a high of 20,730 yuan/mt, a low of 20,515 yuan/mt, and closed at 20,685 yuan/mt. The trading volume was 77,000 lots, and the open interest was 254,000 lots. Last night, LME aluminum opened at $2,600.5/mt, with a high of $2,602/mt, a low of $2,597/mt, and closed at $2,602/mt.

Macro: (1) The latest minutes from the US Fed's June meeting revealed growing divisions among officials over the interest rate outlook, primarily due to differing expectations on how tariffs might impact inflation. (Neutral★) (2) Bernd Lange, Chairman of the European Parliament's Committee on International Trade, stated that the current trade dispute between the EU and the US remains focused on tariffs in specific industries, particularly steel, automobiles, copper, and possibly pharmaceutical products. The EU is prepared with countermeasures, with the first phase set to take effect automatically on July 14. (Bearish★)

Fundamentals: (1) According to SMM statistics, as of July 10, the inventory of primary aluminum ingots in major domestic consumption areas was 466,000 mt, a decrease of 8,000 mt from the previous Thursday and 12,000 mt from Monday. (Bullish★) (2) According to SMM statistics, on July 9, the inventory of aluminum ingots in Guangdong was 140,500 mt; in Wuxi, it was 112,500 mt; and in Gongyi, it was 72,500 mt. The total inventory in these three regions was 325,500 mt, a decrease of 6,500 mt from the previous trading day. (Bullish★)

Primary Aluminum Market: Yesterday morning, the center of the SHFE aluminum futures market rose slightly to around 20,650 yuan/mt. As the aluminum price center fell, downstream just-in-time procurement slightly rebounded. Daily inventory in east China slightly decreased, with spot premiums mostly trading against the SMM average price, and premiums stabilizing somewhat. Yesterday, SMM A00 aluminum was reported at 20,660 yuan/mt, up 60 yuan/mt from the previous trading day, with a discount of 50 yuan/mt against the 07 contract, unchanged from the previous trading day. Against the backdrop of some previous supplies in the central China market being diverted to surrounding areas and large traders hoarding warrants in the market to cope with the risk of a short squeeze in the 07 contract, after experiencing several consecutive days of premium trading against the central China average price, the activity in the central China market began to pull back during the off-season, with spot premiums trading at 20 yuan/mt against the SMM central China average price, little changed from the previous trading day. Yesterday, SMM central China A00 aluminum was recorded at 20,550 yuan/mt against the SHFE aluminum 2507 contract, up 70 yuan/mt from the previous trading day, with a price spread of -110 yuan/mt between Henan and Shanghai, narrowing by 10 yuan/mt from the previous trading day, and a discount of 160 yuan/mt against the 2507 contract.

Secondary Aluminum Raw Materials: Yesterday, the spot price of primary aluminum rose by 60 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,660 yuan/mt. The overall price of the aluminum scrap market continued to rebound. Currently in the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with procurement primarily driven by immediate needs. Yesterday, the centralized 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 product, baled UBC aluminum scrap prices rebounded by 50 yuan/mt MoM from the previous trading day, following the upward trend in aluminum prices. Regionally, Shanghai, Jiangsu, Shandong, and other regions closely followed aluminum price movements, with price adjustments ranging from 50 to 100 yuan/mt. In Guizhou, Hunan, and other regions, price adjustments lagged behind aluminum price movements, with quotes remaining unchanged from the previous day. After Jiangxi region raised aluminum scrap prices in a concentrated manner the day before yesterday, it chose to maintain stability yesterday, digesting the previous day's proactive price adjustment sentiment. This week, the aluminum scrap market is expected to remain in a state of hovering at highs and cautious price adjustments. 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 aluminum scrap may continue its downward trend under off-season demand pressure, potentially dipping to 15,200-15,700 yuan/mt. Subsequent developments require close attention to changes in raw material circulation margins and signals of terminal order recovery.

Secondary Aluminum Alloy: On the futures market, yesterday, the most-traded cast aluminum alloy 2511 futures contract opened at 19,855 yuan/mt, reaching a high of 19,885 yuan/mt and a low of 19,770 yuan/mt, before closing at 19,830 yuan/mt, down 20 yuan/mt or 0.10% from the previous close, with a trading volume of 2,249 and an open interest of 8,571, dominated by bulls reducing their positions. In the spot market, yesterday, the SMM A00 aluminum price increased by 60 yuan/mt from Tuesday to 20,660 yuan/mt, while the SMM ADC12 price remained stable at 20,000 yuan/mt. Recently, both domestic and overseas aluminum scrap supplies have tightened, significantly increasing the difficulty for secondary aluminum smelters to procure raw materials. Competition for "scrambling for materials" in the market has intensified, while production costs continue to rise, expanding the scope of production losses for enterprises. Constrained by both raw material shortages and weakening demand, multiple secondary aluminum smelters have been forced to cut production, with some even entering a state of shutdown. Overall, strong cost support and weak demand continue to battle it out, with ADC12 prices expected to maintain a weak and narrowly fluctuating pattern in July.

Summary: On the macro front, the US Fed's June minutes revealed intensified internal divisions, with most officials believing that interest rate cuts are appropriate within the year, but hawks insisting on maintaining stability. The core of the disagreement lies in the persistent impact of tariffs on inflation. The EU's trade retaliation measures against the US (effective from July 14) target key sectors such as steel, automobiles, and copper, exacerbating global supply chain uncertainties. On the fundamental front, aluminum smelters in some regions have increased their casting ingot production, but arrivals remain low, leading to short-term destocking of social aluminum ingot inventory. As July progresses, the off-season atmosphere is thick among downstream sectors, and the high aluminum prices further suppress production performance, making spot market transactions less than ideal. Overall, in the short term, low inventory levels and limited arrivals are supporting the resilience of aluminum prices. However, weak orders during the traditional off-season and export disruptions are limiting the upside potential of prices. It is expected that the risks of downward pressure on aluminum prices at high levels will intensify, with some upside remaining but limited. Going forward, attention should be paid to casting ingot volumes, aluminum ingot shipment schedules, 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 and should not rely on this information as a substitute for independent judgment. Any decisions made by clients are independent of SMM.]

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