Domestic "anti-rat race" efforts stimulate industrial metal rally, with aluminum prices fluctuating at highs [SMM Aluminum Morning Meeting Summary]

7.21 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,560 yuan/mt, with a high of 20,795 yuan/mt, a low of 20,560 yuan/mt, and closed at 20,770 yuan/mt, up 1.27% from the previous close. LME aluminum opened at $2,589.5/mt, with a high of $2,638.5/mt, a low of $2,582.5/mt, and closed at $2,638.0/mt, up 1.89%.

Macro: (1) Xie Shaofeng, Chief Engineer of the Ministry of Industry and Information Technology, stated at the State Council Information Office press conference on July 18 that a new round of steady growth work plans for ten key industries, including steel, non-ferrous metals, petrochemicals, and building materials, will be implemented to promote structural adjustments, optimize supply, and eliminate outdated capacity in key industries. Specific work plans will be released in the near future. (Bullish★) (2) US President Trump held talks with Indonesian President Prabowo and successfully reached an important agreement. As part of the agreement, Indonesia has committed to purchasing US energy worth up to $15 billion and US agricultural products worth $4.5 billion, while also importing 50 Boeing aircraft. In addition, the agreement stipulates that the US will impose a unified 19% tariff on all imported Indonesian goods, while Indonesia will enjoy tariff-free and other non-tariff barrier preferences when importing US goods. (Neutral) (3) US Treasury Secretary Bentsen recently privately advised US President Trump that he should not attempt to fire Fed Chairman Powell. Bentsen warned that firing Powell could have economic, political, and legal consequences. (Neutral)

Fundamentals: (1) According to SMM statistics, as of July 21, China's domestic social inventory of primary aluminum was 498,000 mt, an inventory buildup of 6,000 mt from the previous Thursday. (Bearish★) (2) The latest data from the General Administration of Customs show that in June 2025, China's exports of unwrought aluminum and aluminum semis were 490,000 mt, down 19.8% YoY; the cumulative exports from January to June were 2.92 million mt, down 8.0% YoY. (Bearish★) (3) The latest statistics from the Ministry of Public Security show that in the first half of the year, the number of newly registered NEVs in China reached 5.622 million units, a 27.86% increase from the same period in previous years. By the end of June, the nationwide ownership of NEVs had climbed to 36.89 million units. (Neutral)

Primary Aluminum Market: On the previous trading day's morning session, SHFE aluminum futures fluctuated at highs. Due to the price increase, downstream purchase intentions weakened significantly today, and transactions were concentrated among traders. However, variations in premiums and discounts emerged across regions. Specifically, in east China, the market still offered SMM +10 to +20 in the morning, with reduced shipments and relatively firm market prices. As the futures price center moved higher, downstream purchases weakened, with fewer transactions at a premium of +20 yuan/mt, while deals at +10 yuan/mt were more easily concluded. In the previous trading session, SMM A00 aluminum closed at 20,700 yuan/mt, up 130 yuan/mt from the prior session, with a premium of 110 yuan/mt against the 2508 contract, an increase of 10 yuan/mt from the previous day. In the central China market, transactions were mainly concluded at a discount of 10 yuan/mt to SMM central China prices in early trading today, with the price center moving higher. Spot transactions in the previous session were moderate, and the price spread between Henan and Shanghai widened to 140 yuan/mt. SMM central China prices stood at 20,560 yuan/mt, at a discount of 30 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: Spot primary aluminum prices rose by 130 yuan/mt from the previous session, with SMM A00 spot aluminum closing at 20,700 yuan/mt, while the aluminum scrap market generally followed the upward trend. Amid the current off-season, downstream scrap utilization enterprises saw weak order releases, with purchases mainly driven by rigid demand. In the previous session, baled UBC scrap prices were concentrated at 15,250-15,750 yuan/mt (excluding tax), and shredded aluminum tense scrap prices ranged between 15,900-17,400 yuan/mt (excluding tax). According to feedback from secondary aluminum enterprises, secondary aluminum alloy prices remain sluggish. Although scrap recycling poses challenges, constrained by poor operating rates, upside room for prices is also limited. This week, the aluminum scrap market is expected to follow bearish expectations for aluminum prices, with the overall price center likely to decline further. Undersupply of raw materials will provide medium and long-term support for aluminum scrap prices, but weak off-season demand will continue to cap upside room. Shredded aluminum tense scrap remains resilient due to tight supply, with prices expected to fluctuate rangebound between 15,600-17,200 yuan/mt. Baled UBC scrap faces persistent downward pressure amid weak off-season demand, with prices potentially testing 15,000-15,500 yuan/mt.

Secondary aluminum alloy: On the futures market, the most-traded cast aluminum alloy 2511 contract opened at 19,810 yuan/mt in the previous session. By midday close, the contract hit a high of 19,950 yuan/mt and a low of 19,810 yuan/mt, settling at 19,905 yuan/mt, up 60 yuan/mt or 0.30% from the previous close, with longs leading the increase in positions. In the spot market, SMM A00 aluminum prices rose by another 130 yuan/mt to 20,700 yuan/mt on Friday, while SMM ADC12 prices increased by 100 yuan/mt to 20,100 yuan/mt. Aluminum prices extended gains further in the previous session, and amid tight supply, aluminum scrap prices followed suit, directly pushing up the cost of recycled aluminum raw materials. Most secondary aluminum producers raised offers by 100 yuan/mt, with the market showing active follow-up sentiment. However, actual consumption remained sluggish, and downstream purchasing enthusiasm was moderate. Overall, short-term cost support from aluminum scrap for secondary aluminum prices is strengthening, but weak demand coupled with high social inventory levels will limit upside room for prices of ADC12 and other secondary aluminum alloys.

Summary: Macro-wise, uncertainties surrounding overseas tariff policies and rumors of personnel changes continue to keep risk assets cautious. Domestically, industrial metals rose driven by policies against "rat race" competition. Fundamentals-wise, with supply increments being released and consumption in the off-season, the expectation of inventory buildup remains strong. Aluminum prices are expected to fluctuate at highs in the short term. Subsequent 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 decisions prudently and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]