A new round of tariff hikes has been implemented, and aluminum prices will remain under pressure in the short term [SMM Aluminum Morning Meeting Summary]

8.4 SMM Aluminum Morning Meeting Summary

Futures Market: On Friday evening, the most-traded SHFE aluminum 2509 contract opened at 20,460 yuan/mt, with a high of 20,495 yuan/mt, a low of 20,405 yuan/mt, and closed at 20,480 yuan/mt. Trading volume was 43,000 lots, and open interest was 230,000 lots. On Friday, LME aluminum opened at $2,565/mt, with a high of $2,576/mt, a low of $2,543/mt, and closed at $2,571.5/mt.

Macro: (1) US Trade Representative Greer stated that the new round of tariffs imposed by US President Trump on multiple countries last week was "largely finalized" and would not be adjusted in current negotiations. This includes a 35% tariff on goods imported from Canada, a 50% tariff on Brazil, a 25% tariff on India, and a 39% tariff on Switzerland. (Bearish ★) (2) VAT invoice data shows that in the first half of this year, the growth rate of manufacturing sales revenue was 1.5 percentage points faster than the overall growth rate of enterprises nationwide, becoming an important support for stabilizing economic growth. The "high-end" transformation of the manufacturing industry is also steadily advancing, with sales revenue of the equipment manufacturing industry and high-tech manufacturing industry increasing by 8.9% and 11.9% YoY, respectively. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of August 4, the inventory of electrolytic aluminum ingots in major domestic consumption areas was 564,000 mt, an increase of 20,000 mt from Thursday last week. (Bearish ★) (2) According to SMM statistics, as of August 4, the inventory of aluminum ingots in Guangdong was 175,000 mt; in Wuxi, it was 163,000 mt; and in Gongyi, it was 78,000 mt. The total inventory in these three regions was 416,000 mt, an increase of 22,000 mt from Thursday last week. (Bearish ★)

Primary Aluminum Market: On Friday morning, the center of the SHFE aluminum futures market remained at a low level. In the spot market, as the futures market fell on the weekend, suppliers' reluctance to budge on prices emerged again. Both the east China and central China markets saw price increases in succession, with the central China market performing strongly. Specifically, in the east China region, the spot market mainly traded at the average price in the early morning, with a small amount of SMM+10 transactions appearing later. In addition, the off-season atmosphere in the downstream sector was strong, with just-in-time procurement being the main activity, showing no significant improvement. On Friday, SMM A00 aluminum was reported at 20,520 yuan/mt, down 60 yuan/mt from the previous trading day, with a discount of 20 yuan/mt against the 2508 contract, unchanged from the previous trading day. In the central China market, transactions were made at SMM central China +20 in the early morning of Friday, with market prices remaining strong. The price in the central China region had a large discount against the futures market, and suppliers' reluctance to budge on prices emerged again, driving the price spread between Henan and Shanghai to narrow continuously to 130 yuan/mt. On Friday, SMM central China was reported at 20,390 yuan/mt, with a discount of 150 yuan/mt against the 2508 contract.

Recycled Aluminum Raw Materials: On Friday, the spot price of primary aluminum fell by 60 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,520 yuan/mt, and the overall price of the aluminum scrap market fell. Currently in the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with procurement mainly driven by immediate needs. Last Friday, the centralized quotes for baled UBC aluminum scrap ranged from 15,200 to 15,700 yuan/mt (tax-exclusive), while those for shredded aluminum tense scrap (with water content) ranged from 16,700 to 17,200 yuan/mt (tax-exclusive). Regionally, Shanghai, Jiangsu, Shandong, and other areas closely followed aluminum price trends, with price adjustments ranging from 50 to 100 yuan/mt. In Hubei, Guizhou, and other areas, price adjustments lagged behind aluminum price trends, with quotes remaining flat MoM. Today, aluminum scrap prices in Jiangxi, Hunan, Anhui, and other areas have decreased by 100 yuan/mt across the board. Regional price adjustments vary, but the overall trend is downward. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai decreased by 6 yuan/mt MoM to 1,944 yuan/mt, while the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan increased by 59 yuan/mt MoM to 1,998 yuan/mt. It is expected that the price center of the aluminum scrap market this week may further return to off-season levels. The bearish expectations for primary aluminum (such as macro pressure and high inventory) persist, coupled with the continued suppression of weak off-season demand, limiting the overall upside room for aluminum scrap. However, the tight supply of raw materials still provides medium and long-term bottom support. Shredded aluminum tense scrap, supported by the supply side, has strong price resilience and is expected to fluctuate rangebound within 16,800 to 17,300 yuan/mt (tax-exclusive). Baled UBC, due to weak end-use demand, faces significant downward pressure, with prices possibly dropping to 15,000 to 15,500 yuan/mt (tax-exclusive).

Secondary aluminum alloy: On the futures market, last Friday, the most-traded cast aluminum alloy futures contract 2511 opened at the highest point of 19,950 yuan/mt, with the lowest point at 19,850 yuan/mt, and closed at 19,920 yuan/mt, down 30 yuan/mt or 0.15% from the previous trading day. The open interest was 8,431 lots, and the trading volume was 2,098 lots, with bulls mainly reducing their positions during the day. In the spot market, last Friday, the SMM A00 aluminum price decreased by 60 yuan/mt from the previous day to 20,520 yuan/mt, and the SMM ADC12 price decreased by 100 yuan/mt to 20,000 yuan/mt. With aluminum prices declining for two consecutive days, accumulating a total decrease of 150 yuan/mt, aluminum scrap prices followed suit and decreased. Coupled with the decline in auxiliary material prices such as copper and silicon metal, the cost support for secondary aluminum alloy has weakened somewhat. Meanwhile, recent weak end-use consumption has led to sluggish actual transactions, with market prices generally following the downward trend. However, the short-term supply of aluminum scrap remains tight, providing some support for prices due to high costs. 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 short-term ADC12 price will maintain a narrow and weak oscillating pattern.

Summary: From a macro perspective, the implementation of a new round of tariff hikes by the US, involving major trading partners such as Canada and Brazil, has escalated trade barriers and heightened concerns about global economic growth, negatively impacting the demand outlook for industrial metals. Although domestic manufacturing data shows structural optimization, the market remains cautious about the effectiveness of subsequent policy stimulus measures. Fundamentals: Supply side, domestic operating aluminum capacity remained stable, while the proportion of liquid aluminum pulled back, leading to an increase in casting ingot volume, which boosted market supply availability. Coupled with continuous social inventory buildup, aluminum prices faced upward pressure. Cost side, aluminum production costs held steady WoW, with no significant changes in raw material prices during the period. However, the price center of aluminum pulled back, narrowing the industry's average profit by around 149 yuan/mt. Demand side, downstream off-season sentiment persisted, with spot purchasing as needed and weak spot premiums. PV, NEV, and home appliance sheet sectors remained in the off-season. Despite the pullback in aluminum prices, processing plants saw no clear improvement in orders on hand. Inventory-wise, according to SMM statistics, domestic aluminum social inventory stood at 564,000 mt on August 4, up 20,000 mt WoW. Against the off-season backdrop, inventory buildup expectations remain strong. Overall, macro-wise, the domestic positive sentiment persists, with the "rat race" competition sentiment digested. Market focus now shifts to the outcome of China-US negotiations. Fundamentals-wise, amid supply increment releases and off-season demand pressure, inventory buildup expectations remain strong, with spot premiums/discounts in the doldrums. Aluminum prices are expected to maintain a pressured trend. Close attention should be paid to inventory and demand changes.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should exercise caution in decision-making and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]