US Fed keeps interest rates unchanged; aluminum prices fluctuate at highs in the short term [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on July 31

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,635 yuan/mt, with a high of 20,670 yuan/mt, a low of 20,595 yuan/mt, and closed at 20,615 yuan/mt, down 0.05% from the previous close. LME aluminum opened at $2,607.5/mt, with a high of $2,621/mt, a low of $2,599.5/mt, and closed at $2,608/mt, up 0.08% from the previous close.

Macro: (1) The Political Bureau of the CPC Central Committee meeting deployed economic work for the second half of the year, emphasizing the continuous implementation of macro policies, including proactive fiscal policy and moderately loose monetary policy, to promote the stabilization and improvement of the capital market. (Bullish ★) (2) Trump announced a comprehensive trade agreement between the US and South Korea, with South Korea investing $350 billion in selected US projects and purchasing $100 billion worth of energy products, while fully opening its market to US goods and reducing US tariffs on South Korea to 15%. (Neutral) (3) At 2 a.m. Beijing time on Thursday, the US Fed announced its latest interest rate decision, maintaining the benchmark interest rate within the 4.25%-4.50% range as expected, temporarily ignoring Trump's pressure. (Bearish ★)

Fundamentals: (1) According to SMM statistics, domestic primary aluminum ingot inventory was 544,000 mt on July 31, with an inventory buildup of 11,000 mt from the previous trading day. (Bearish ★) (2) On July 30, SHFE aluminum futures warrants recorded 51,217 mt, down 18,357 mt from the previous trading day. In the recent week, SHFE aluminum futures warrants decreased by a cumulative 6,506 mt, a decrease of 11.27%. In the recent month, SHFE aluminum futures warrants increased by a cumulative 22,487 mt, an increase of 78.27%. (Neutral) (3) On July 30, LME aluminum inventory recorded 460,400 mt, up 4,250 mt from the previous day, an increase of 0.93%. In the recent week, LME aluminum inventory increased by a cumulative 15,600 mt, an increase of 3.50%. In the recent month, LME aluminum inventory increased by a cumulative 114,600 mt, an increase of 33.15%. (Bearish ★)

Primary Aluminum Market: Yesterday morning, the center of SHFE aluminum prices fluctuated around 20,650 yuan/mt. In the spot market, spot premiums and discounts in Shanghai and Henan showed mixed performance yesterday, but transactions remained generally sluggish, with the off-season atmosphere persisting downstream. Specifically, in east China, the spot market mainly traded at the average price in the morning, with SMM-10 transactions appearing later. Currently, overall transactions are generally sluggish, with downstream just-in-time procurement as the main activity, showing no significant improvement. Yesterday, SMM A00 aluminum was reported at 20,670 yuan/mt, up 50 yuan/mt from the previous trading day, with a discount of 10 yuan/mt against the 2508 contract, down 10 yuan/mt from the previous trading day. In the central China market, offers were initially made at SMM central China +10 and +20 in the early morning yesterday, with the transaction center at SMM central China +10. The price spread between Henan and Shanghai narrowed to 140 yuan/mt, mainly due to some suppliers in central China holding back cargoes and strong reluctance to budge on prices. Yesterday, SMM central China reported 20,500 yuan/mt, at a discount of 180 yuan/mt to the 2508 contract.

Recycled aluminum raw materials: Spot primary aluminum prices pulled back slightly by 50 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,670 yuan/mt, while the aluminum scrap market remained flat overall. Amid the traditional off-season, downstream scrap utilization enterprises saw weak order releases and maintained rigid demand-based procurement. Yesterday, baled UBC scrap was quoted at 15,300-15,900 yuan/mt (ex-tax), and shredded aluminum tense scrap was quoted at 15,800-17,300 yuan/mt (ex-tax). Regionally, Shanghai, Jiangsu, and Shandong closely followed aluminum price movements, with adjustments ranging from 0-50 yuan/mt, while Jiangxi, Foshan, Hunan, and Guizhou lagged behind, reporting flat prices WoW. In Hubei, both aluminum tense scrap and wrought aluminum alloy scrap prices rose by 100 yuan/mt across the board, reflecting delayed adjustments. Regarding the price difference between A00 aluminum and aluminum scrap, the spread for mechanical casting aluminum scrap in Shanghai narrowed by 4 yuan/mt WoW to 1,932 yuan/mt, while the spread for mixed aluminum extrusion scrap free of paint in Foshan narrowed by 60 yuan/mt WoW to 1,922 yuan/mt.

Secondary aluminum alloy: Aluminum prices edged up slightly yesterday, while the secondary aluminum market remained stable, with SMM ADC12 prices holding steady at 20,100 yuan/mt. Recently, sluggish end-use consumption and weak demand have led to sluggish actual transactions, but persistently high aluminum scrap procurement prices provided support. Overall, cost support will continue to limit downside room, while high social inventory and persistently weak actual demand will cap upside room. ADC12 prices are expected to fluctuate rangebound in the short term.

Summary: Macro-wise, the US Fed kept interest rates unchanged, and the US dollar index remained strong. Domestically, policies against "rat race" competition drove industrial metals higher, with the long-term tone of "promoting consumption and stabilizing growth" unchanged. Fundamentally, amid supply increments and off-season demand pressure, inventory buildup expectations remain strong. Additionally, recent market sentiment toward policies like "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 pull back from highs. Subsequent attention should be paid to inventory and market sentiment changes.

[Data source statement: Except for publicly available information, other data are derived from public information, market exchanges, and SMM's internal database model, processed by SMM for reference only and not constituting decision-making advice.]