Sino-US tariff policies ease, aluminum prices fluctuate at highs in the short term [SMM Aluminum Morning Meeting Summary]

7.3 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,585 yuan/mt, with a high of 20,675 yuan/mt, a low of 20,570 yuan/mt, and closed at 20,620 yuan/mt, up 0.07% from the previous close. LME aluminum opened at $2,634/mt, with a high of $2,634/mt, a low of $2,601/mt, and closed at $2,606/mt, down 0.95%.

Macro: (1) The China-US economic and trade teams held in-depth exchanges on major issues, agreeing to promote the scheduled extension of the 24% portion of the reciprocal tariff that the US has suspended, as well as China's retaliatory measures, and will continue to communicate to stabilize bilateral economic and trade relations. (Bullish ★) (2) The International Monetary Fund (IMF) released its latest World Economic Outlook, significantly raising China's economic growth forecast for this year by 0.8 percentage points to 4.8%, reflecting stronger-than-expected economic activity in China in the first half of the year and significantly lower actual tariff rates between China and the US than predicted in April. (Bullish ★) (3) A central bank survey showed that entrepreneurs and bankers hold a neutral-to-cautious attitude towards the macro economy, residents feel cold about employment, and most expect prices and housing prices to remain stable. (Neutral)

Fundamentals: (1) According to SMM statistics, the daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi on July 29 totaled 30,936 mt, an increase of 25 mt from the previous trading day and 2,159 mt from Tuesday of the previous week. (Bearish ★) (2) According to SMM statistics, from July 21 to July 27, domestic aluminum ingot outflows from warehouses totaled 92,500 mt, a decrease of 15,700 mt MoM; domestic aluminum billet outflows from warehouses totaled 48,400 mt, a decrease of 3,600 mt MoM. (Bearish ★) (3) According to SMM survey, the trend of aluminum scrap imports from Southeast Asia is currently declining, which is related to local border conflicts and illegal smuggling issues. It is expected that this downward trend may continue until the end of 2025 or the beginning of 2026 and will largely depend on the policies implemented by governments in Southeast Asian countries. (Bullish ★)

Primary Aluminum Market: On Monday night session, the aluminum price center oscillated around 20,690 yuan/mt. Yesterday morning, the SHFE aluminum price center moved downward and then oscillated between 20,600-20,650 yuan/mt. In the spot market, spot premiums/discounts in Shanghai and Henan showed a stabilizing trend yesterday, but downstream purchases remained low in enthusiasm. Specifically, in east China, the spot market mainly traded at the average morning price, with a small portion at SMM-10. However, overall, suppliers showed strong reluctance to budge on prices, and spot premiums stabilized. Yesterday, SMM A00 aluminum was reported at 20,620 yuan/mt, down 40 yuan/mt from the previous trading day, at parity with the 2508 contract, unchanged from the previous trading day. In the central China market yesterday morning, the market initially quoted SMM central China at parity and +10, with the transaction center gradually shifting towards SMM central China +10. The price spread between Henan and Shanghai narrowed to 180 yuan/mt. SMM central China reported a price of 20,440 yuan/mt, with a discount of 180 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: Yesterday, the spot price of primary aluminum fell by 40 yuan/mt compared to the previous trading day. SMM A00 spot aluminum closed at 20,620 yuan/mt, and the aluminum scrap market remained generally stable. 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 quotes for baled UBC aluminum scrap ranged from 15,300 to 15,900 yuan/mt (tax not included), while the centralized quotes for shredded aluminum tense scrap ranged from 15,800 to 17,300 yuan/mt (tax not included). By region, Shanghai, Jiangsu, Shandong, and other areas closely followed aluminum price movements, with price adjustments ranging from 0 to 50 yuan/mt. Foshan, Hunan, Guizhou, and other areas lagged behind aluminum price movements, with yesterday's quotes remaining flat MoM. In Jiangxi, the prices of all wrought aluminum alloy scrap categories were lowered by 100 yuan/mt yesterday, with a delay in price adjustments. 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, the upside room for aluminum scrap as a whole is limited. However, the tight supply of raw materials still provides medium and long-term bottom support. The pattern of product differentiation continues: shredded aluminum tense scrap, supported by tight supply, has strong price resilience and fluctuates rangebound within 15,600 to 17,200 yuan/mt (tax not included). Baled UBC, due to weak terminal demand, faces significant downward pressure, with prices possibly dropping to 15,000 to 15,500 yuan/mt (tax not included).

Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy futures contract 2511 opened at 20,050 yuan/mt. By the midday close, the futures market reached a high of 20,060 yuan/mt and a low of 19,900 yuan/mt, closing at 20,040 yuan/mt, down 15 yuan/mt from the previous close, a decrease of 0.07%, with bulls mainly reducing their positions. In the spot market, yesterday, the SMM A00 aluminum price fell by 40 yuan/mt from the previous day to 20,620 yuan/mt, while the SMM ADC12 price remained stable at 20,100 yuan/mt. Yesterday, aluminum prices fluctuated rangebound, and the secondary aluminum market performed steadily, with prices basically remaining stable. Recently, end-use consumption has been sluggish, and actual transactions have been sluggish amid weak demand. However, the sustained high procurement prices of aluminum scrap have provided support for prices. Overall, cost support will continue to limit the downside room for prices, while high social inventory and persistently weak actual demand will suppress the upside room for prices. It is expected that the ADC12 price will maintain a pattern of fluctuating rangebound in the short term.

Summary: Overall, in terms of macro factors, in the short term, influenced by the easing of Sino-US tariffs and the IMF's upward revision of growth expectations, market sentiment is optimistic. However, the domestic economy still faces challenges such as employment pressure and insufficient domestic demand. Domestic policies related to "combating the rat race" competition have driven up industrial metals, and the long-term tone of "promoting consumption and stabilizing growth" remains unchanged. Fundamentally, amid the release of supply increments and the suppression from the off-season demand, expectations for inventory buildup remain strong. Additionally, recent sentiment among funds toward policies such as "anti-'rat race' competition" 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 attention should be paid to changes in inventory and fund 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.]