The manufacturing sector's prosperity level has pulled back, and aluminum prices are expected to remain in the doldrums in the short term [SMM Aluminum Morning Meeting Summary]

8.1 SMM Aluminum Morning Meeting Summary

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,480 yuan/mt, with a high of 20,490 yuan/mt, a low of 20,430 yuan/mt, and closed at 20,450 yuan/mt, down 0.29% from the previous close. LME aluminum opened at $2,599/mt, with a high of $2,609/mt, a low of $2,562.5/mt, and closed at $2,562.5/mt, down 1.74%.

Macro: (1) The National Bureau of Statistics (NBS) announced that China's manufacturing PMI for July was 49.3%, down 0.4 percentage points from the previous month, indicating a slight pullback in manufacturing prosperity. (Bearish★) (2) The National Development and Reform Commission (NDRC) outlined nine key tasks for the second half of the year, emphasizing the need to focus on stabilizing employment and expanding domestic demand, strengthening policy research and reserves, increasing efforts to stabilize investment and promote consumption, and advancing the construction of a unified national market to eliminate "rat race" competition. (Bullish★) (3) Trump signed an executive order raising US tariffs on Canada from 25% to 35% starting August 1, citing Canada's "inaction and retaliatory measures," and simultaneously adjusted tariff standards for multiple countries to combat transshipment tax evasion. (Neutral)

Fundamentals: (1) In terms of inventory, according to SMM's data on domestic aluminum ingot inventory in three regions, domestic primary aluminum ingot inventory stood at 386,000 mt on July 31, down 2,500 mt from the previous trading day. (Bullish★) (2) On July 31, SMM reported that the primary aluminum inventory in the Shanghai Bonded Zone was 88,500 mt, and in the Guangdong Bonded Zone was 19,000 mt, totaling 107,500 mt, down 3,300 mt WoW. (Bullish★) (3) On July 31, LME aluminum inventory was recorded at 461,000 mt, up 675 mt or 0.15% from the previous day. Over the past week, LME aluminum inventory increased by 12,900 mt or 2.88%. Over the past month, LME aluminum inventory increased by 112,400 mt or 32.24%. (Bearish★)

Primary Aluminum Market: Yesterday morning, the center of SHFE aluminum futures fluctuated downward, while in the spot market, spot premiums and discounts in Shanghai and Henan showed mixed performance. Suppliers in central China had a strong reluctance to budge on prices, but market transactions in both regions remained generally sluggish, with the off-season atmosphere persisting among downstream buyers. Specifically, in east China, the spot market mainly traded at the average morning price, with SMM-10 transactions appearing later. Currently, the off-season atmosphere among downstream buyers is strong, with just-in-time procurement being the main activity, showing no significant improvement. Yesterday, SMM A00 aluminum was reported at 20,580 yuan/mt, down 90 yuan/mt from the previous trading day, with a discount of 20 yuan/mt against the 2508 contract, down 10 yuan/mt from the previous trading day. In the central China market yesterday morning, transactions were made at SMM central China +20, with market prices showing strength. This was mainly due to the favorable hedging profit under the current price spread between futures contracts, leading suppliers to hold back cargoes. Additionally, the large discount of central China prices against futures prices reignited suppliers' reluctance to budge on prices, narrowing the price spread between Henan and Shanghai to 150 yuan/mt. Yesterday, SMM central China was reported at 20,430 yuan/mt, with a discount of 170 yuan/mt against the 2508 contract.

Secondary Aluminum Raw Materials: Yesterday, the spot price of primary aluminum fell by 90 yuan/mt compared to the previous trading day. SMM A00 spot aluminum closed at 20,580 yuan/mt, while the aluminum scrap market remained stable overall. Amid the traditional off-season, downstream scrap utilization enterprises faced weak order releases, with procurement primarily driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,250 to 157,500 yuan/mt (tax-exclusive), while shredded aluminum tense scrap (water price) was quoted at 16,800 to 17,300 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other areas closely followed aluminum price movements, with price adjustments ranging from 50 to 100 yuan/mt. In Jiangxi, Foshan, Hunan, Anhui, and other regions, price adjustments lagged behind aluminum price movements, with yesterday's quoted prices remaining flat MoM. In terms of the price difference between A00 aluminum and aluminum scrap, the price spread between mechanical casting aluminum scrap and A00 aluminum in Shanghai increased by 18 yuan/mt MoM from the previous day to 1,950 yuan/mt, while the price spread between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan increased by 18 yuan/mt MoM from the previous day to 1,940 yuan/mt. It is expected that the price center of the aluminum scrap market may further return to off-season levels next week. The bearish outlook for primary aluminum (such as macroeconomic pressures and high inventory levels) persists, coupled with the continued suppression of weak off-season demand, limiting the overall upside potential for aluminum scrap. However, tight raw material supply still provides medium and long-term bottom support. Shredded aluminum tense scrap, supported by the supply side, exhibits strong price resilience and is expected to fluctuate rangebound within 16,800 to 17,300 yuan/mt (tax-exclusive). Baled UBC aluminum scrap, due to weak terminal 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, yesterday, the most-traded cast aluminum alloy futures contract 2511 opened at 20,090 yuan/mt, with a high of 20,095 yuan/mt, a low of 19,910 yuan/mt, and closed at 19,950 yuan/mt, down 120 yuan/mt or 0.60% from the previous trading day. The open interest was 8,479 lots, and the trading volume was 2,079 lots, with bulls reducing their positions during the day. In the spot market, yesterday, the SMM A00 aluminum price fell by 90 yuan/mt from the previous day to 20,580 yuan/mt, while the SMM ADC12 price remained stable at 20,100 yuan/mt. Amid the narrow fluctuations in aluminum prices during the week, the secondary aluminum alloy market remained stable. Recently, weak terminal consumption and sluggish actual transactions under weak demand have been observed, but the sustained high procurement prices for aluminum scrap provide support. Overall, cost support will continue to limit the downside potential for prices, while high social inventory levels and persistently weak actual demand will suppress the upside potential for prices. It is expected that the ADC12 price will maintain a narrow rangebound pattern in the short term.

Summary: Overall, in terms of macroeconomic factors, the manufacturing PMI index declined in July, indicating a drop in the manufacturing sector's prosperity level. Domestic 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, amid the release of supply increments and the suppression of off-season consumption, inventory buildup expectations remain strong. Additionally, recent market sentiment toward policies such as "anti-rat race" and "high-quality development" has cooled, with futures initially jumping and then pulling back. In the short term, aluminum prices are expected to remain in the doldrums. Subsequent attention should focus on inventory levels and shifts in capital 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.]