Overseas uncertainty has eased somewhat, with short-term aluminum prices mainly fluctuating at highs [SMM Aluminum Morning Meeting Summary]

7.28 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,765 yuan/mt, with a high of 20,790 yuan/mt, a low of 20,605 yuan/mt, and closed at 20,615 yuan/mt, down 0.70% from the previous close. LME aluminum opened at $2,646.0/mt, with a high of $2,659.5/mt, a low of $2,630.5/mt, and closed at $2,631.0/mt, down 0.57%.

Macro: (1) On July 24, the China Securities Regulatory Commission (CSRC) held a meeting on party building within the CSRC system and the mid-year work conference for 2025. The meeting emphasized the need to fully consolidate the market's stabilization and improvement trend, introduce a package of measures to deepen the reform of the ChiNext Board, foster and expand long-term and patient capital with greater vigor, and vigorously promote the entry of medium and long-term funds into the market. (Bullish ★) (2) On the 27th, US President Trump stated that the US had reached a tariff agreement with the EU at a rate of 15%, with the EU increasing its investments in the US by $600 billion compared to before, purchasing US military equipment, and buying US energy products worth $750 billion. European Commission President Ursula von der Leyen indicated that a 15% tariff rate would apply to various goods, including automobiles. (Bearish ★) (3) US Secretary of Commerce Gina Raimondo recently stated in an interview that the US would not extend the tariff hike deadline set for August 1. (Bullish ★)

Fundamentals: (1) Last week, the operating rate of leading enterprises in China's aluminum downstream processing sector slipped slightly by 0.1 percentage points from the previous week to 58.7%, down 3.5 percentage points year-on-year. (Bearish ★) (2) On July 25, LME aluminum inventory was recorded at 450,800 mt, up 2,725 mt or 0.61% from the previous day. Over the past week, LME aluminum inventory increased by a cumulative 20,100 mt or 4.67%. Over the past month, LME aluminum inventory increased by a cumulative 112,900 mt or 33.42%. (Bearish ★) (3) According to SMM survey statistics, as of late July, in-plant inventory of aluminum billets in domestic aluminum billet plants was approximately 115,000 mt, up 1,900 mt MoM from the same period last month. The average days of inventories remained unchanged at 2.3 days from the same period last month, with signs of stabilization in the aluminum billet supply side approaching August. (Bearish ★) (4) According to SMM statistics, on July 28, the inventory of primary aluminum ingots in domestic mainstream consumption areas was 533,000 mt, up 35,000 mt from Monday and 23,000 mt from last Thursday. (Bearish ★)

Primary Aluminum Market: On Friday morning, SHFE aluminum oscillated around 20,750 yuan/mt before gradually climbing to around 20,800 yuan/mt. In east China, trading improved approaching the weekend, coupled with some large enterprises not shipping goods on the day due to month-end accounting, spot premiums held steady at around 10 yuan/mt premium over the SMM average price. On Friday last week, SMM A00 aluminum was quoted at 20,780 yuan/mt, up 60 yuan/mt from the previous trading day, with a premium of 10 yuan/mt against the August contract, unchanged from the previous trading day. After the price center of aluminum in the central China market fell, downstream purchasing efforts slightly rebounded, coupled with intra-day stockpiling ahead of the weekend. Suppliers continued to refuse to budge on prices, with offers initially centered around premiums. Intra-day, there was a premium of 10 yuan/mt against SMM central China. SMM central China A00 aluminum was recorded at 20,590 yuan/mt against the SHFE aluminum 2508 futures contract, up 70 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -190 yuan/mt, narrowing by 10 yuan/mt from the previous trading day, with a discount of 180 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: On Friday last week, the spot price of primary aluminum fell by 60 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,780 yuan/mt, with the aluminum scrap market generally following the increase. In the current traditional off-season, downstream scrap utilization enterprises have seen weak order releases, with purchases mainly driven by immediate needs. On Friday last week, the centralized quotes for baled UBC aluminum scrap ranged from 15,400 to 15,900 yuan/mt (tax-exclusive), while shredded aluminum tense scrap was quoted at 15,800 to 17,300 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other places closely followed aluminum price movements, with price adjustments ranging from 50 to 100 yuan/mt. In Guizhou, Hunan, and other regions, price adjustments lagged behind aluminum price movements, as they chose to wait and see without adjusting prices on the previous trading day, resulting in unchanged quotes on Friday last week compared to the previous week on a MoM basis. It is expected that the aluminum scrap market will continue to be in the doldrums this week, with the price center returning to off-season levels. The bearish outlook for primary aluminum has not dissipated, coupled with the continued suppression of weak off-season demand, limiting the upside room for aluminum scrap as a whole. However, the tight supply of raw materials still provides bottom support in the medium and long-term. The pattern of product differentiation continues: shredded aluminum tense scrap is supported by tight supply, with strong price resilience, fluctuating rangebound within 15,600 to 17,200 yuan/mt (tax-exclusive). Baled UBC aluminum scrap, due to weak end-use demand, faces significant downward pressure, with prices possibly dipping to 15,000 to 15,500 yuan/mt (tax-exclusive).

Secondary aluminum alloy: On the futures market, on Friday last week, the most-traded cast aluminum alloy 2511 futures contract opened at 20,135 yuan/mt, with a high of 20,205 yuan/mt, a low of 20,090 yuan/mt, and closed at 20,135 yuan/mt, unchanged from the previous trading day. Trading volume was 2,103, and open interest was 9,207, with bulls mainly increasing their positions intra-day. In the spot market, on Friday last week, the SMM A00 aluminum price increased by 60 yuan/mt from the previous day to 20,780 yuan/mt, while the SMM ADC12 price remained stable at 20,200 yuan/mt. On Friday last week, aluminum prices rebounded slightly, with the secondary aluminum market maintaining stable quotes. During the week, aluminum scrap prices continued to follow the increase in aluminum prices due to tight supply, while silicon prices surged significantly due to macro policy stimuli. The simultaneous increase in aluminum scrap and auxiliary material prices jointly pushed up the production costs of secondary aluminum plants. Demand remains weak, with some downstream sectors entering high-temperature holidays. Weak end-use consumption reduces the acceptance of high prices and restricts price increases. Overall, cost-side support for prices remains, while high social inventory and sluggish demand will cap upside room. ADC12 prices are expected to fluctuate rangebound in the short term.

Summary: Macro-wise, the US dollar rose on Friday, supported by resilient US economic data indicating the US Fed may remain patient in resuming interest rate cuts. Meanwhile, progress in tariff negotiations with certain countries has clarified trade conditions, easing market uncertainties. Domestically, policies against "rat race" competition have driven industrial metals higher, with the long-term tone of "sales promotions and stable growth" remaining unchanged. Fundamentals-wise, supply increments and off-season demand continue to pressure the market, with inventory buildup expectations still strong. Additionally, recent sentiment toward policies like "anti-rat race" and "high-quality development" has cooled, causing futures to jump initially and then pull back. Aluminum prices are expected to fluctuate at highs in the short term. Subsequent focus should be on inventory and fund sentiment changes.

[Data Source Statement: Data beyond publicly available information is derived from public sources, market exchanges, and SMM's internal database models, processed by SMM for reference only and not as decision-making advice.]