Macro and cost support are limited. Aluminum prices are suppressed by inventory buildup and off-season demand in the short term [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on July 15

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2508 contract opened at 20,390 yuan/mt, with a high of 20,410 yuan/mt, a low of 20,335 yuan/mt, and closed at 20,405 yuan/mt. The trading volume was 42,200 lots, and the open interest was 215,000 lots. On the previous trading day, LME aluminum opened at $2,603/mt, with a high of $2,604.5/mt, a low of $2,574/mt, and closed at $2,596.5/mt.

Macro: (1) The "Opinions of the Central Committee of the Communist Party of China on Strengthening Trial Work in the New Era" was recently released. It proposes strengthening financial trial work, severely punishing financial crimes such as market manipulation, insider trading, illegal fundraising, loan fraud, and money laundering in accordance with the law, strengthening collaborative governance of illegal intermediary chaos in the financial sector, and promoting the healthy development of the financial market. (Bullish ★) (2) Zou Lan, Deputy Governor of the People's Bank of China, stated at a State Council Information Office press conference that structural monetary policy tools will highlight support for technological innovation, consumption boosting, and other main lines; the misalignment of monetary policy cycles between China and the US in the second half of the year will be improved, and the interest rate differential between China and the US will narrow. (Bullish ★) (3) Trump stated that if an agreement cannot be reached within 50 days to end the Russia-Ukraine conflict, the US will impose "very severe tariffs of approximately 100%" on Russia. (Bullish ★)

Fundamentals: (1) According to data from the General Administration of Customs, China's exports of unwrought aluminum and aluminum semis reached 489,000 mt in June 2025, down 19.84% YoY and 10.60% MoM; cumulative exports from January to June were 2.919 million mt, down 8.00% YoY. (Bearish ★) (2) According to SMM statistics, domestic aluminum billet outflows from warehouses totaled 44,200 mt during July 7-13, an increase of 9,400 mt MoM. (Bullish ★) (3) According to SMM statistics, domestic aluminum ingot outflows from warehouses totaled 100,100 mt during July 7-13, a decrease of 7,500 mt MoM. (Bearish ★)

Primary Aluminum Market: On Monday morning, SHFE aluminum opened with a significant decline, with the center of gravity moving down by 400 yuan/mt. The futures market continued to operate at a low level, eventually closing at 20,530 yuan/mt. In the morning, spot market transactions in mainstream consumption areas were generally average. Some suppliers, seeing the rapid price pullback, had a renewed wait-and-see sentiment, and shipments fell compared to the previous week. Specifically, in east China, the market still offered at -10 yuan/mt against the SMM average price in the morning. Overall, downstream purchase willingness remained weak, coupled with upstream wait-and-see sentiment, and most transactions on Monday were at SMM-10 yuan/mt. On Monday, SMM A00 aluminum was reported at 20,470 yuan/mt, down 320 yuan/mt from the previous trading day, with a discount of 60 yuan/mt against the 07 contract, narrowing by 10 yuan/mt from the previous trading day. In central China, despite the significant decline in the futures market, influenced by inventory buildup and market transaction sentiment, the market continued to offer at a discount for shipments on Monday. On Monday, the spot market quoted SMM Central China -20 and -10, with the price spread between Henan and Shanghai markets widening to 140 yuan/mt, an increase of 10 yuan/mt from the previous trading day. The spot aluminum was quoted at a discount of 200 yuan/mt against the 2507 contract.

Secondary aluminum raw materials: On Monday, the spot price of primary aluminum fell by 320 yuan/mt from the previous trading day. SMM A00 aluminum closed at 20,470 yuan/mt, and the aluminum scrap market followed the decline. In the current traditional off-season, downstream scrap utilization enterprises have seen weak order releases, with procurement mainly driven by immediate needs. On Monday, the centralized quotes for baled UBC aluminum scrap ranged from 15,150-15,650 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 15,800-17,300 yuan/mt (excluding tax). By product, baled UBC aluminum scrap prices fell by 250 yuan/mt WoW from Friday, basically following the decline in aluminum prices. By region, Shanghai, Jiangsu, Shandong, and other places closely followed aluminum price movements, with price adjustments ranging from 200-300 yuan/mt. Hunan, Guangdong, Jiangxi, Anhui, and other places lagged behind aluminum price movements, with price adjustments ranging from 100-200 yuan/mt. According to feedback from secondary aluminum enterprises, secondary aluminum alloy prices are currently low. Although scrap recycling is a challenge, due to poor operating rates, the upside room for prices is also limited. It is expected that the aluminum scrap market will continue to fluctuate at highs this week, with product differentiation and regional differences persisting. Shredded aluminum tense scrap is expected to maintain price resilience due to strong support from tight supply, with an operating range expected to fluctuate rangebound within 15,500-17,000 yuan/mt. Baled UBC aluminum scrap is under significant downward pressure due to weak off-season demand, with prices possibly falling to 15,000-15,500 yuan/mt.

Secondary aluminum alloy: On the futures market, on Monday, the most-traded cast aluminum alloy 2511 futures contract opened at 19,880 yuan/mt, reaching a high of 19,950 yuan/mt and a low of 19,700 yuan/mt, before closing at 19,805 yuan/mt, down 125 yuan/mt or 0.63% from Friday. Trading volume was 4,628, and open interest was 8,293, with bulls mainly reducing their positions during the day. In the spot market, on Monday, the SMM A00 aluminum price fell sharply by 320 yuan/mt from Friday to 20,470 yuan/mt, while the SMM ADC12 price fell by 100 yuan/mt to 20,000 yuan/mt. Despite the significant decline in aluminum prices on Monday, due to tight supply, the decline in raw material prices was relatively limited, providing some support for ADC12 prices. Most quotes were adjusted downward by 100 yuan/mt, while a few manufacturers chose to maintain firm quotes due to cost pressure. However, the weak demand side continued, with orders for secondary aluminum enterprises significantly declining compared to June. Due to the dual constraints of raw material shortages and weakening demand, several secondary aluminum manufacturers have been forced to cut production, with some even entering a state of shutdown. Overall, strong cost support and weak demand continue to battle, with ADC12 prices expected to maintain a narrow fluctuation range in July.

Summary: On the macro side, the domestic favorable atmosphere remains unchanged; the US June CPI data is about to be released, with market expectations that prices of goods affected by tariffs, such as furniture and toys, may rise faster, potentially pushing the core inflation rate up to 2.9%. Meanwhile, the impact of overseas tariffs on trade flows has not yet dissipated. On the fundamental side, domestic operating capacity for primary aluminum slightly decreased due to replacement projects, with the proportion of liquid aluminum falling to 74.78% and casting ingot volumes increasing. Cost side, there has been an upward trend in recent times due to rising alumina prices. On the demand side, most downstream sectors are in a strong off-season atmosphere, with aluminum prices rising during the off-season, further suppressing demand. Operating rates in the aluminum processing sector remain sluggish. Additionally, domestic social inventory of primary aluminum ingots has once again turned to an inventory buildup trend. SMM expects that aluminum prices will be under pressure in the short term, with subsequent focus on changes in inventory and demand.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Customers should make prudent decisions and should not use this information to replace their independent judgment. Any decisions made by customers are not related to SMM.]

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