Aluminum market in off-season, eyes on Sino-US negotiations [SMM Aluminum Price Weekly Review]

On the macro front, during the period, the US Fed announced its latest interest rate decision. As expected by the market, the central bank maintained its benchmark interest rate within the range of 4.25%-4.50%, ignoring pressure from Trump. The US dollar index remained strong, suppressing metal prices. Additionally, recently, the economic and trade teams of China and the US conducted 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. They will continue to communicate to stabilize bilateral economic and trade relations. Subsequent attention should be paid to the impact of the China-US negotiation results on the futures market. Domestically, 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 policies and moderately loose monetary policies, and promoting the stabilization and improvement of the capital market, with a clear bullish atmosphere.

On the fundamental front, on the supply side, the operating capacity of domestic aluminum remained stable. The proportion of liquid aluminum pulled back, and the increase in casting ingot volume, i.e., the increase in market-circulating supply, combined with the continuous inventory buildup in social inventory, suppressed the upward movement of aluminum prices. The cost side of the aluminum industry remained stable during the week. As of Thursday this week, the domestic average full cost of aluminum was approximately 16,750 yuan/mt, up about 9 yuan/mt from Thursday last week. There were no significant changes in the raw material sector during the period, but the center of aluminum prices moved downward, narrowing the industry's average profit by about 149 yuan/mt. On the demand side, the off-season atmosphere persisted downstream, with spot purchasing as needed and a lack of upward momentum in spot premiums. The PV, NEV, and home appliance plate and strip sectors remained in the off-season. Despite the decline in aluminum prices, there was no significant improvement trend in the orders on hand at processing plants.

Overall, domestically, the bullish atmosphere on the macro front remains unchanged, with the "anti-rat race" competition sentiment dissipating. Subsequent attention should be paid to the impact of the China-US negotiation results. On the fundamental front, under the pressure of supply increment release and the off-season in consumption, the inventory buildup expectation remains strong. Spot premiums and discounts are in the doldrums. Subsequent attention should be focused on changes in inventory and demand. Next week, the most-traded SHFE aluminum contract is expected to trade around 20,300-20,800 yuan/mt, and LME aluminum is expected to trade around $2,550-2,620/mt.