Capital sentiment cools down, aluminum prices fall back from highs [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on July 24

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,780 yuan/mt, with a high of 20,815 yuan/mt, a low of 20,725 yuan/mt, and closed at 20,750 yuan/mt, down 0.19% from the previous close. LME aluminum opened at $2,648.5/mt, with a high of $2,659.0/mt, a low of $2,632.5/mt, and closed at $2,639.0/mt, down 0.49%.

Macro: (1) A spokesperson from the Ministry of Commerce introduced that, as agreed by both China and the US, Vice Premier He Lifeng of the State Council will visit Sweden from July 27 to 30 to hold economic and trade talks with the US side. (Bullish ★) (2) Zheng Shanjie, Director of the National Development and Reform Commission (NDRC), presided over a symposium and stated that they will actively take pragmatic and effective measures to improve the institutional mechanisms for the coordinated development of state-owned and private enterprises, promote the rectification of "rat race" competition, expand industry chain and supply chain cooperation, facilitate scientific and technological innovation, and improve corporate governance and international business services. (Bullish ★) (3) US President Trump stated that he will impose simple tariffs ranging from 15% to 50% on most other countries in the world. (Bullish ★)

Fundamentals: (1) According to SMM statistics, domestic aluminum ingot inventory increased by 12,000 mt from Monday to 510,000 mt. (Bearish ★) (2) According to SMM statistics, regarding the inventory of aluminum billet in two locations in China, the inventory of aluminum billet in Guangdong was 60,500 mt, and the inventory of aluminum billet in Wuxi was 22,500 mt, totaling 83,000 mt, down 500 mt MoM. (Bullish ★) (3) Tajikistan has formulated a plan to achieve an average annual growth rate of 20% in primary aluminum output over the next three years. (Neutral)

Primary Aluminum Market: Yesterday morning, the center of SHFE aluminum prices fell somewhat, oscillating and consolidating around 20,800 yuan/mt. In east China, the purchase sentiment of processed material enterprises was weak, with intraday transactions mainly centered around long-term contracts from traders. The spot order market remained sluggish, and downstream enterprises had a strong wait-and-see sentiment. Transactions were made at around -30 yuan/mt against the SMM average price. Yesterday, SMM A00 aluminum was reported at 20,850 yuan/mt, down 90 yuan/mt from the previous trading day, with a premium of 40 yuan/mt against the 08 contract, down 30 yuan/mt from the previous trading day. In the central China market, there were still many sellers, while downstream enterprises purchased very few spot orders. Even though the center of aluminum prices moved downward, most processed material enterprises chose to wait and see, resulting in poor market liquidity. Transactions were made at discounts ranging from 20 to 50 yuan/mt against SMM central China prices, with the premium and discount transaction range expanding again. SMM central China A00 aluminum was recorded at 20,630 yuan/mt against the SHFE aluminum 2508 contract, down 120 yuan/mt from the previous trading day. The price difference between central China and Shanghai was -220 yuan/mt, expanding by 30 yuan/mt from the previous trading day, with a discount of 180 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: Yesterday, the spot price of primary aluminum fell by 90 yuan/mt compared to the previous trading day. SMM A00 spot aluminum closed at 20,850 yuan/mt, and the overall aluminum scrap market followed the decline. Currently in the traditional off-season, downstream scrap utilization enterprises have weak order releases, with procurement mainly driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap was 15,450-15,950 yuan/mt (tax-exclusive), and the centralized quoted price for shredded aluminum tense scrap was 15,900-17,400 yuan/mt (tax-exclusive). By region, Shanghai, Jiangsu, Shandong, and other places closely followed aluminum price movements, with price adjustments ranging from 50-100 yuan/mt. In Guizhou, Hunan, and other places, price adjustments lagged behind aluminum price movements. 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 also continue to constrain upside room. Shredded aluminum tense scrap is strongly supported by tight supply, with price resilience remaining, and is expected to fluctuate rangebound within the operating range of 15,600-17,200 yuan/mt. Baled UBC aluminum scrap is constrained by weak off-season demand, with significant downward pressure remaining. Price trends closely follow aluminum price fluctuations, with an average price operating 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 20,300 yuan/mt, surging to 20,350 yuan/mt after the opening bell, then pulling back sharply, hitting bottom at 20,080 yuan/mt, and finally closing at 20,155 yuan/mt, down 125 yuan/mt from the previous trading day, a decrease of 0.62%, with a trading volume of 3,812 and an open interest of 9,445. Bulls mainly reduced their positions during the day. In the spot market, yesterday, the SMM A00 aluminum price fell by 90 yuan/mt from the previous day to 20,850 yuan/mt, while the SMM ADC12 price remained stable at 20,250 yuan/mt. Yesterday, aluminum prices ended their consecutive rises, and secondary aluminum market prices generally remained stable, with downward pressure on prices. Firstly, there is cost support, as the market supply of aluminum scrap remains tight, leading to high procurement prices for manufacturers and difficulties in restocking. Secondly, due to factors such as insufficient raw materials, a decline in enterprise operating rates, or concentrated futures and spot deliveries, manufacturers' finished product inventories have decreased, and tight supply has spurred enterprises' reluctance to budge on prices. In the short term, costs still support ADC12 prices, but currently, secondary aluminum alloy social inventories are high, with some warehouses in east China reaching capacity. Additionally, weak actual demand and poor shipments constrain the subsequent price upside range. It is expected that ADC12 prices will maintain narrow fluctuations in the short term.

Summary: Overall, in terms of macro factors, overseas tariffs have been successively confirmed and are lower than previously, reducing uncertain risks and facilitating the recovery of overseas demand. Domestically, policies related to "combating rat race competition" have driven industrial metal prices higher, with the long-term tone of "promoting consumption and stabilizing growth" remaining unchanged. On the fundamental side, amid the release of supply increments and the suppression of the off-season consumption, expectations for inventory buildup remain strong. Additionally, recent market sentiment toward policies such as "anti-'rat race' competition" and "high-quality development" has cooled, with futures initially jumping and then pulling back. In the short term, domestic aluminum prices are expected to experience a high-level pullback. Subsequent attention should be paid to changes in inventory and capital sentiment.

[Data Source Statement: Except for publicly available information, other data are derived from public information, market exchanges, and processed by SMM based on its internal database model, for reference only and not constituting decision-making advice.]