Domestic positive factors and cost support offset overseas pressure. Short-term inventory decline and long-term inventory accumulation, as well as demand, are key variables [SMM Aluminum Morning Meeting Summary]

7.17 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,415 yuan/mt, with a high of 20,450 yuan/mt, a low of 20,390 yuan/mt, and closed at 20,425 yuan/mt. Trading volume was 45,800 lots, and open interest was 260,000 lots. On the previous trading day, LME aluminum opened at $2,582/mt, with a high of $2,585.5/mt, a low of $2,562/mt, and closed at $2,575.5/mt.

Macro: (1) US President Trump stated that tariff letters for some smaller countries would also be issued soon, with tariffs expected to be set at "slightly above 10%" for these countries. (Bullish★) (2) Due to persistently high borrowing costs, the number of mortgage applications for home purchases in the US fell to the lowest level since late May last week. The mortgage applications index fell sharply by 11.8% in the week ending July 11. Against the backdrop of constrained affordability, a sustained decline in financing costs is key to stimulating the real estate market. (Bearish★) (3) The US PPI in June increased by 2.3% YoY, compared to the estimated 2.5% and the previous value of 2.6%; it remained flat MoM, compared to the estimated 0.2% and the previous value of 0.1%. (Bearish★)

Fundamentals: (1) On July 16, the inventory of aluminum ingots in Guangdong was 145,000 mt; in Wuxi, it was 121,500 mt; and in Gongyi, it was 69,000 mt. The total inventory across these three locations was 335,500 mt, a decrease of 6,500 mt from the previous trading day. Regarding the inventory of aluminum billets in two domestic locations, the inventory of aluminum billets in Guangdong was 73,800 mt, and in Wuxi, it was 22,500 mt, totaling 96,300 mt, a decrease of 1,800 mt MoM. (Bullish★) (2) On July 16, LME aluminum inventory was recorded at 423,500 mt, an increase of 6,550 mt from the previous day, representing a 1.57% increase. In the most recent week, LME aluminum inventory increased by 32,700 mt, representing an 8.37% increase. In the most recent month, LME aluminum inventory increased by 72,300 mt, representing a 20.59% increase. (Bearish★)

Primary Aluminum Market: On Wednesday, during the first trading session of SHFE aluminum, prices fluctuated between 20,400-20,470 yuan/mt. After the center of aluminum prices pulled back in the past two days, the market trading atmosphere improved, and downstream purchase willingness slightly picked up, driving the stabilization of spot premiums and discounts in mainstream consumption areas. Specifically, in east China, the market still offered goods at +10 yuan/mt above the SMM average price in the morning, and downstream purchase willingness improved somewhat. Most transactions on Wednesday were at SMM+10. On Wednesday, SMM A00 aluminum was reported at 20,520 yuan/mt, an increase of 10 yuan/mt from the previous trading day, with a premium of 90 against the 2508 contract, an increase of 40 yuan/mt from the previous trading day, mainly due to the approaching contract rollover. There was no significant improvement in the fundamental supply and demand situation, and the promotional effect of relatively low prices on demand still needed to be verified. In the central China market, transactions were mainly concluded at SMM central China prices plus 10 yuan/mt early Wednesday morning, later shifting to average price transactions. This was due to ample supply and downstream production cuts that remained unrecovered, with no significant improvement in actual demand. The Henan-Shanghai price spread held at 140 yuan/mt, at a 50 yuan/mt discount to the 2508 contract.

Recycled aluminum raw materials: Spot primary aluminum prices edged up 10 yuan/mt WoW on Wednesday, with SMM A00 spot aluminum closing at 20,520 yuan/mt. The aluminum scrap market remained flat overall. Amid the traditional off-season, downstream scrap utilization enterprises saw sluggish order releases, with procurement mainly driven by rigid demand. Baled UBC scrap was quoted at 15,200-15,700 yuan/mt (ex-tax), while shredded aluminum tense scrap traded at 15,900-17,400 yuan/mt (ex-tax). Secondary aluminum alloy producers reported weak prices, with scrap recycling posing challenges, but limited upside room due to poor operating rates. The scrap market is expected to hover at highs this week, with persistent product differentiation and regional disparities. Shredded aluminum tense scrap, supported by tight supply, is likely to maintain price resilience, fluctuating rangebound at 15,500-17,000 yuan/mt. Baled UBC, pressured by weak off-season demand, faces downward risks, potentially testing 15,000-15,500 yuan/mt.

Secondary aluminum alloy: Aluminum prices extended modest gains Wednesday, while secondary aluminum offers held steady, with SMM ADC12 unchanged at 20,000 yuan/mt. Persistently weak demand and subdued downstream procurement sentiment led to order declines and sluggish transactions. Overall, undersupply of raw materials provides strong support for prices, but tepid demand caps upside potential. ADC12 prices are expected to fluctuate rangebound in the near term.

Summary: Domestically, the macro-friendly tone persists. The US June PPI unexpectedly missed forecasts, dragged down by declining service prices, with businesses absorbing partial costs amid higher import tariffs—reflecting pressured domestic demand and squeezed profit margins. This reinforced concerns over the US economic outlook and signaled potential cooling in industrial and aluminum-consuming sectors (e.g., real estate, automobiles), indirectly dampening global aluminum demand expectations. Fundamentally, China’s aluminum operating capacity dipped slightly due to replacement projects, with the proportion of liquid aluminum dropping to 74.78% and ingot casting rising. Cost side, alumina price hikes recently pushed costs upward. Demand side, most downstream sectors remain mired in off-season sluggishness, with seasonally high aluminum prices further suppressing demand. Aluminum processing operating rates stayed sluggish. On July 17, mainstream consumption area aluminum ingot social inventory stood at 492,000 mt, down 9,000 mt from Monday but up 26,000 mt WoW, indicating short-term destocking amid an overall buildup trend. SMM expects aluminum prices to consolidate at highs, with inventory and demand dynamics warranting close monitoring.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions prudently and not use it to replace independent judgment. Any decisions made by clients are unrelated to SMM.]

》Click to view SMM aluminum industry chain database

》Subscribe to view SMM metal spot historical prices