Macro and fundamentals are intertwined, with short-term aluminum prices fluctuating at highs [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on July 29

Futures Market: In the night session of the previous trading day, the most-traded SHFE aluminum 2509 contract opened at 20,635 yuan/mt, with a high of 20,695 yuan/mt, a low of 20,625 yuan/mt, and closed at 20,660 yuan/mt, up 0.22% from the previous close. LME aluminum opened at $2,637/mt, with a high of $2,642/mt, a low of $2,624/mt, and closed at $2,631/mt, unchanged from the previous close.

Macro: (1) On July 28, the Ministry of Industry and Information Technology (MIIT) held a symposium to consolidate the achievements of comprehensive rectification of the "rat race" competition in the NEV industry and strengthen the governance of key industries such as PV (bullish★). (2) Trump shortened the deadline for Russia-Ukraine peace talks to 10-12 days, threatening to impose secondary sanctions and tariffs on Russia, and publicly criticized Putin, saying he was "disappointed" in him, while also changing his stance and announcing that he would provide Ukraine with the "Patriot" air defense system (bearish★). (3) Thailand and Cambodia reached a ceasefire agreement, which officially took effect at 24:00 on July 28, with both sides confirming the cessation of border conflicts under the mediation of Malaysia (bullish★).

Fundamentals: (1) According to SMM statistics, during the period from July 21 to July 27, the total outflows of aluminum ingots from warehouses in China were 92,500 mt, a decrease of 15,700 mt MoM; the total outflows of aluminum billets from warehouses in China were 48,400 mt, a decrease of 3,600 mt MoM (bearish★). (2) According to SMM statistics, yesterday, the inventory of primary aluminum ingots at major consumption areas in China was 533,000 mt, an increase of 23,000 mt from last Thursday and an increase of 35,000 mt from last Monday. On a YoY basis, the inventory of aluminum ingots in China lost its advantageous position of being at a low level compared to the same period in the past three years. Although it was still down 281,000 mt compared to the same period last year, it had increased by 8,000 mt compared to the same period in 2023 (bearish★). (3) According to SMM statistics, yesterday, the inventory of aluminum billets at major consumption areas in China was 147,500 mt, an increase of 2,000 mt from last Thursday and a decrease of 3,500 mt from last Monday (neutral).

Primary Aluminum Market: On Friday night, the center of aluminum prices shifted downward. Yesterday morning, the center of SHFE aluminum prices fluctuated downward, with transactions mainly concentrated among traders. Some downstream buyers made small purchases today due to the price decline. Specifically, in east China, the average price was traded in the morning spot market. Later, as buyers showed strong willingness to purchase at SMM-10 and sellers increased, the transaction price gradually shifted towards SMM-10. In addition, some downstream buyers made small purchases at low prices today. Yesterday, SMM A00 aluminum was reported at 20,660 yuan/mt, down 120 yuan/mt from the previous trading day, on par with the 2508 contract, and the premium against the 2508 contract narrowed by 10 yuan/mt from the previous trading day. In the central China market, yesterday morning, the market mainly traded at parity with SMM central China. Despite the downward shift in the price center, there was no significant improvement in spot transactions. The price spread between Henan and Shanghai remained at 140 yuan/mt. SMM central China was reported at 20,470 yuan/mt, with a discount of 190 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: Yesterday, the spot price of primary aluminum fell by 120 yuan/mt compared to the previous trading day. SMM A00 spot aluminum closed at 20,660 yuan/mt. The aluminum scrap market generally followed the price changes. Currently in the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,300 to 15,900 yuan/mt (tax-exclusive), while the quoted price for shredded aluminum tense scrap ranged from 15,800 to 17,300 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other areas closely followed aluminum price movements, with price adjustments ranging from 100 to 150 yuan/mt. In Jiangxi, Hunan, and other regions, price adjustments lagged behind aluminum price movements, with a strong reluctance to budge on prices, resulting in quoted prices remaining flat WoW. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 12 yuan/mt WoW from Friday to 1,922 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed by 12 yuan/mt WoW from Friday to 1,912 yuan/mt. 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 remains, coupled with the continued suppression of weak demand during the off-season, limiting the upside potential for aluminum scrap prices. However, tight raw material supply still provides medium and long-term bottom support. The pattern of product differentiation continues: shredded aluminum tense scrap, supported by tight supply, exhibits 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 potentially dropping to 15,000 to 15,500 yuan/mt (tax-exclusive).

Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy 2511 futures contract opened at 20,110 yuan/mt, reaching a high of 20,170 yuan/mt and a low of 19,960 yuan/mt, before closing at 20,025 yuan/mt, down 110 yuan/mt or 0.55% from the previous trading day. The open interest was 9,085 lots, and the trading volume was 3,505 lots, with bulls reducing their positions during the day. In the spot market, yesterday, the SMM A00 aluminum price fell by 120 yuan/mt from the previous day to 20,660 yuan/mt, while the SMM ADC12 price fell by 100 yuan/mt to 20,100 yuan/mt. The decline in aluminum and silicon prices drove down the cost of ADC12, coupled with reduced orders during the high-temperature off-season, leading to a 100 yuan/mt decrease in quoted prices. Overall, cost support remains, but high social inventory and weak demand suppress upside potential. It is expected that ADC12 prices will remain rangebound in the short term.

Summary: Overall, the US dollar index continued to rise by 1.01%. The newly reached US-EU trade agreement enhanced market risk appetite, supporting the US dollar's strength. However, the market continues to expect that the US Fed may initiate an interest rate cut in September. Domestically, policies related to "combating rat race competition" have driven up industrial metal prices, with the long-term tone of "promoting consumption and stabilizing growth" remaining unchanged. On the fundamental side, amidst the release of supply increments and the suppression of consumption during the off-season, 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. Short-term aluminum prices are expected to fluctuate at highs. Subsequent attention should focus on 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.]