Mixed bullish and bearish sentiments, aluminum prices fluctuated [SMM Aluminum Morning Meeting Summary]

7.25 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,760 yuan/mt, with a high of 20,810 yuan/mt, a low of 20,730 yuan/mt, and closed at 20,755 yuan/mt, down 0.02% from the previous close. LME aluminum opened at $2,642.0/mt, with a high of $2,664.5/mt, a low of $2,637.5/mt, and closed at $2,646.0/mt, up 0.27%.

Macro: (1) The National Development and Reform Commission (NDRC) and the State Administration for Market Regulation are soliciting public opinions on the draft amendment to the Price Law. The draft amendment refines the criteria for identifying dumping at below-cost prices, regulates market price order, and addresses "rat race" competition. It also refines the criteria for identifying unfair pricing practices such as price collusion, price gouging, and price discrimination. (Bullish ★) (2) The State-owned Assets Supervision and Administration Commission (SASAC) of the State Council held a seminar for local SASAC officials, emphasizing the need to optimize the allocation of incremental state-owned assets, adjust the structure of existing assets, lead the way in resisting "rat race" competition, strengthen restructuring and integration, promote the optimal allocation of state capital, and form a new layout and structure for state capital. (Bullish ★) (3) US President Trump visited the US Fed. Trump stated that he discussed interest rates with Fed Chairman Powell, calling the conversation "productive." Trump expressed hope that Powell would lower interest rates, stating that if interest rates were reduced by three percentage points to one percentage point, the US could save over $1 trillion. He will observe how the committee formulates interest rate rules. (Bullish ★)

Fundamentals: (1) According to SMM statistics, the weekly proportion of liquid aluminum at domestic aluminum smelters fell again to 73.69%, and in-plant inventory at aluminum smelters continued to grow, reaching 77,300 mt. (Bearish ★) (2) On July 24, SMM statistics showed that the inventory of electrolytic aluminum in the Shanghai Bonded Zone was 92,800 mt, and the inventory in the Guangdong Bonded Zone was 18,000 mt, totaling 110,800 mt, a decrease of 4,700 mt WoW. (Bullish ★) (3) On July 24, Chuangxin New Materials announced the progress of its joint investment with its controlling shareholder, Chuangxin Group, and other related parties in the Red Sea Aluminium Ltd. project. The company plans to invest no more than $209 million and is expected to hold a 25.20% stake in the project. The project will undertake a comprehensive aluminum industry chain project in the Red Sea region of Saudi Arabia. (Neutral)

Primary Aluminum Market: Yesterday morning, SHFE aluminum initially oscillated around 20,780 yuan/mt, clearly under pressure from the daily average line. Around 10 a.m., the center gradually fell to around 20,700 yuan/mt. In east China, the purchasing sentiment of processed material enterprises was weak, with daily transactions mainly centered around long-term contracts from traders, and the spot order market remained sluggish. Affected by the off-season, downstream enterprises had insufficient orders on hand, and the intensity of just-in-time procurement remained weak. The average transaction price against the SMM average price was around -20 yuan/mt. Yesterday, SMM A00 aluminum was reported at 20,720 yuan/mt, down 130 yuan/mt from the previous trading day. It was trading at a premium of 10 yuan/mt against the 08 contract, down 30 yuan/mt from the previous trading day. After the center of aluminum prices in the central China market fell, downstream purchasing efforts slightly rebounded, and suppliers raised their prices. From a discount of 10 yuan/mt against transactions in central China before the market opened, the center of transaction prices gradually rose to around a premium of 10 yuan/mt after the market closed. SMM A00 aluminum in central China was recorded at 20,520 yuan/mt against the SHFE aluminum 2508 futures contract, down 110 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -200 yuan/mt, narrowing by 20 yuan/mt from the previous trading day, and trading at a discount of 190 yuan/mt against the 2508 futures contract.

Recycled aluminum raw materials: Yesterday, the spot price of primary aluminum fell by 130 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,720 yuan/mt, and the overall aluminum scrap market followed the decline. In the current traditional off-season, downstream scrap utilization enterprises have weak order releases, with purchases mainly driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap was in the range of 15,350-15,850 yuan/mt (tax-excluded), and the centralized quoted price for shredded aluminum tense scrap was in the range of 15,800-17,300 yuan/mt (tax-excluded price). By region, Shanghai, Jiangsu, Shandong, and other places closely followed aluminum price movements, with price adjustments in the range of 50-100 yuan/mt. In Guizhou, Hunan, and other places, price adjustments lagged behind aluminum price movements. As they chose to wait and see without adjusting prices yesterday, today's quoted prices remained unchanged MoM. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan decreased by 12 yuan/mt from yesterday to 1,864 yuan/mt, and the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai decreased by 22 yuan/mt from yesterday to 1,928 yuan/mt. It is expected that the aluminum scrap market this week may follow aluminum prices in fluctuating at highs. The undersupply of raw materials will provide 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. It 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 continued downward pressure. Its price trend aligns with 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 20,150 yuan/mt, with a high of 20,210 yuan/mt, a low of 20,060 yuan/mt, and closed at 20,135 yuan/mt, down 20 yuan/mt or 0.10% from the previous trading day. The trading volume was 2,731, and the open interest was 9,191, with bulls mainly reducing their positions during the day. In the spot market, yesterday, SMM A00 aluminum prices fell by 130 yuan/mt from the previous day to 20,720 yuan/mt, and SMM ADC12 prices fell by 50 yuan/mt to 20,200 yuan/mt. Yesterday, the decline in aluminum prices expanded, and the secondary aluminum market showed a differentiated trend: some enterprises chose to temporarily stabilize their quoted prices due to cost support and critically low finished product inventories, dominated by a reluctance to sell; other enterprises were dragged down by weak demand, with quoted prices following the market decline by 100 yuan/mt. In the short term, costs continue to support ADC12 prices, but the current high social inventory of secondary aluminum alloy, with some warehouses in east China reaching full capacity, coupled with sluggish actual demand and poor shipments, will constrain future price movements. ADC12 prices are expected to maintain a fluctuating trend in the near term.

Summary: Overall, on the macro front, overseas tariffs have been successively confirmed and are lower than earlier estimates, reducing uncertainty risks and benefiting overseas demand recovery. Domestically, policies against "rat race" competition have driven up industrial metals, while the long-term tone of "promoting consumption and stabilizing growth" remains unchanged. Fundamentally, with supply increments being released and the off-season suppressing consumption, expectations of inventory buildup remain strong. Additionally, recent market sentiment toward policies such as "anti-rat race" and "high-quality development" has cooled, leading the futures market to jump initially and then pull back. In the short term, aluminum prices are expected to fluctuate at highs. Going forward, attention should be paid to inventory and capital sentiment changes.

[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.]

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