Macro tailwinds keep aluminium prices fluctuating at highs in the short term [SMM Aluminium Morning Meeting Summary]

7.22 SMM Aluminum Morning Meeting Minutes

Futures: In the previous night session, the most-traded SHFE aluminum 2509 contract opened at 20,850 yuan/mt, hitting a high of 20,875 yuan/mt and a low of 20,790 yuan/mt, before closing at 20,860 yuan/mt, up 0.10% from the previous close. LME aluminum opened at $2,635.0/mt, reached a high of $2,651.5/mt and a low of $2,629.0/mt, and settled at $2,641.0/mt, up 0.11%.

Macro: (1) As of July 21, incomplete statistics show that nine provinces (autonomous regions/municipalities) have released H1 GDP data. Among the six central provinces, Hubei, Henan, Jiangxi, and Hunan outperformed the national average. In H2, local governments are expected to focus on expanding investment and boosting consumption as key driving forces to promote high-quality economic growth. (Bullish★) (2) China's July LPR remained unchanged for the second consecutive month, with the 1-year rate at 3.0% and the 5-year rate at 3.5%. Monetary policy has entered an observation period. Against the backdrop of stable 7-day reverse repo operation rates, the unchanged LPR aligns with market expectations. Market institutions generally anticipate further downside room for LPR in H2. (Bullish★) (3) The European Commission is drafting a new bill requiring large enterprises and car rental companies to fully transition to EV purchases from 2030. Estimates suggest this policy would directly impact around 60% of new auto sales in the EU, covering an annual market size of approximately 6.4 million units. (Neutral)

Fundamentals: (1) According to SMM statistics, aluminum billet inventory in mainstream consumption areas stood at 151,000 mt on July 21, down 5,000 mt WoW from Thursday and 10,000 mt WoW from Monday. (Bullish★) (2) Customs data shows China's aluminum extrusion exports in June 2025 totaled 70,900 mt, down 1.80% MoM and 27.28% YoY. (Bearish★) (3) China's net primary aluminum imports in June 2025 reached 172,700 mt, down 9.4% MoM but up 51.3% YoY. Cumulative net imports from January to June totaled 1.1633 million mt, down 2.3% YoY. (Neutral)

Primary aluminum market: During yesterday's morning session, the SHFE front-month aluminum contract rose above the daily average line to around 20,800 yuan/mt, supported by increased long positions. In east China, downstream purchasing sentiment weakened after the price rally, with trading mainly occurring between traders. Most suppliers were reluctant to offer large discounts, resulting in sluggish market activity. Transactions settled at around -10 yuan/mt against the SMM average price. Yesterday, SMM A00 aluminum was quoted at 20,890 yuan/mt, up 190 yuan/mt from the previous day, at a premium of 100 yuan/mt to the August contract, down 10 yuan/mt from the previous day. In the central China market, aluminum prices rebounded during the day to above the daily average, with many sellers in the market but few downstream enterprises purchasing spot orders. The market premium experienced a price collapse, with a discount of 20 to 40 yuan/mt against SMM central China prices. SMM central China A00 aluminum closed at 20,720 yuan/mt against the most-traded SHFE aluminum 2507 futures contract, up 190 yuan/mt from the previous trading day. The price spread between central China and Shanghai was -170 yuan/mt, expanding by 30 yuan/mt from the previous trading day, and it was at a discount of 70 yuan/mt against the 2508 futures contract.

Recycled aluminum raw materials: Yesterday, spot primary aluminum prices rose by 190 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,890 yuan/mt, with the overall aluminum scrap market following the price increase. Currently in the traditional off-season, downstream scrap utilization enterprises have weak order releases, with purchases mainly based on immediate needs. Yesterday, the centralized quotes for baled UBC aluminum scrap ranged from 15,450 to 15,950 yuan/mt (tax not included), and the centralized quotes for shredded aluminum tense scrap ranged from 16,000 to 17,500 yuan/mt (tax not included). According to feedback from secondary aluminum enterprises, secondary aluminum alloy prices are currently low. Although scrap recycling is a challenge, due to poor operating conditions, the upside room for prices is also limited. It is expected that this week, the aluminum scrap market may follow aluminum prices to fluctuate at highs, with overall prices more likely to rise than fall. Insufficient raw material supply provides medium and long-term support for aluminum scrap prices, but weak off-season demand will continue to constrain upside room. Shredded aluminum tense scrap is strongly supported by tight supply, with price resilience remaining, and it is expected to fluctuate rangebound within the 15,600-17,200 yuan/mt range. Baled UBC aluminum scrap is constrained by weak off-season demand, with significant downward pressure remaining. Its price trend aligns with aluminum price fluctuations, with an average price range of 15,300-15,800 yuan/mt.

Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy 2511 futures contract opened at 19,885 yuan/mt, reaching a high of 20,225 yuan/mt, a new post-listing high, and a low of 19,885 yuan/mt, closing at 20,165 yuan/mt, up 290 yuan/mt or 1.46% from the previous trading day, with a trading volume of 6,973 and open interest of 10,019, mainly with bulls increasing their positions during the day. In the spot market, yesterday, SMM A00 aluminum prices rose by another 190 yuan/mt from the previous day to 20,890 yuan/mt, and SMM ADC12 prices rose by 100 yuan/mt to 20,200 yuan/mt. The continuous upward trend of aluminum prices has driven a general increase in aluminum scrap prices, further pushing up ADC12 costs. The market has a strong willingness to adjust prices, generally increasing them by 100-200 yuan/mt. However, actual consumption performance has been mediocre, with limited transactions. Overall, the support of aluminum scrap costs for secondary aluminum alloy prices has strengthened in the short term, but weak demand combined with high social inventory will constrain the upside room for ADC12 and other secondary aluminum alloy prices. It is expected that they will maintain a fluctuating trend rangebound in the short term.

Summary: Overall, in terms of macro factors, domestic policies related to "anti-rat race" competition have driven up industrial metals, with the long-term tone of "promoting consumption and stabilizing growth" remaining unchanged; overseas macro uncertainties still persist. Fundamentally, inventory performance has fluctuated due to factors like delivery schedules, but considering the release of incremental supply and the suppression from the off-season demand, expectations for inventory buildup remain strong. Recently, capital sentiment has been significantly influenced by macro policies such as "anti-rat race" and "high-quality development," with spot aluminum prices expected to fluctuate at highs in the short term. Subsequent attention should focus on inventory and capital sentiment changes.

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