Macro trade friction risks intensify, with A00 social inventory remaining stable during the week [SMM Aluminum Morning Meeting Summary]

8.7 SMM Aluminum Morning Meeting Summary

Futures: Last night, the most-traded SHFE aluminum 2509 contract opened at 20,760 yuan/mt, with a high of 20,810 yuan/mt, a low of 20,725 yuan/mt, and closed at 20,770 yuan/mt. Trading volume was 61,000 lots, and open interest was 229,000 lots. Last night, LME aluminum opened at $2,619/mt, with a high of $2,627/mt, a low of $2,619/mt, and closed at $2,625.5/mt.

Macro: (1) US President Trump signed an executive order imposing an additional 25% tariff on goods from India, bringing the total tariff rate faced by India to 50% in response to India's continued "direct or indirect imports of Russian oil." The new 25% tariff will take effect in 21 days, with the first round of 25% tariffs set to take effect this Thursday. (Bearish ★) (2) Fed's Kashkari stated that a rate cut may be appropriate in the short term, and two rate cuts this year would be reasonable. (Bullish ★)

Fundamentals: (1) According to SMM statistics, in terms of domestic aluminum billet inventory at two locations, Guangdong's aluminum billet inventory was 58,500 mt, and Wuxi's aluminum billet inventory was 34,000 mt, totaling 92,500 mt, up 500 mt MoM. (Bearish ★) (2) According to SMM statistics, on August 7, the inventory of primary aluminum ingots at domestic mainstream consumption areas was 564,000 mt, unchanged from Monday and up 20,000 mt from last Thursday. (Neutral ★)

Primary Aluminum Market: Yesterday morning, the center of SHFE aluminum futures continued to climb above 20,650 yuan/mt, fluctuating at highs. In east China, downstream processing material purchase efforts remained weak. However, after the market experienced large-scale supplier discounted purchases, yesterday's outflow data from warehouses was moderate, slightly alleviating the selling pressure of suppliers during the day. Spot premiums held steady, with transactions at a discount of 5 yuan/mt or at parity with the SMM average price. Yesterday, SMM A00 aluminum was reported at 20,630 yuan/mt, up 110 yuan/mt from the previous trading day, with a discount of 40 yuan/mt against the 08 contract, unchanged from the previous trading day. In the central China market, discounts were larger in the early stage, with some cargoes shipped to east China. Additionally, after the aluminum price decline in the early stage, downstream consumption slightly recovered, and inventory remained at a relatively low level. However, actual downstream consumption did not show a comprehensive improvement and was still in the off-season. During the day, aluminum prices rebounded above 20,650 yuan/mt, and premiums in central China clearly struggled to rise, moving downwards after a higher opening, with transactions against the SMM central China average price falling from a premium of 10/20 yuan/mt to near parity. SMM central China A00 aluminum was recorded at 20,540 yuan/mt against the most-traded SHFE aluminum 2508 contract, up 120 yuan/mt from the previous trading day. The price spread between central China and Shanghai was -90 yuan/mt, narrowing by 10 yuan/mt from the previous trading day, with a discount of 130 yuan/mt against the 2508 contract.

 Recycled Aluminum Raw Materials: Yesterday, the price of primary aluminum spot goods fell by 110 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,630 yuan/mt, and the overall price of the aluminum scrap market rose. 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 quoted prices for baled UBC aluminum scrap ranged from 15,350 to 15,850 yuan/mt (tax-exclusive), while the centralized quoted prices for shredded aluminum tense scrap (with water price) ranged from 17,000 to 17,500 yuan/mt (tax-exclusive price). Baled UBC aluminum scrap prices increased by 100 yuan/mt MoM, and shredded aluminum tense scrap (with water price) prices increased by 200 yuan/mt MoM. Automobile and motorcycle wheel hub prices surged by 300 yuan/mt. According to producer feedback, there are two reasons for this: firstly, the scarcity of aluminum scrap intensified in August, leading to a significant increase in the difficulty of raw material procurement; secondly, the current policy adjustment period has increased procurement costs for producers. This week, the price center of the aluminum scrap market was expected to further align with off-season levels, but due to the impact of the policy adjustment period related to secondary aluminum, it may instead push up raw material procurement prices. The tight supply of shredded aluminum tense scrap (with water price) resources has intensified, with the operating range expected to fluctuate between 17,000 and 17,500 yuan/mt (tax-exclusive). Baled UBC aluminum scrap prices remain suppressed by weak end-use demand, with an operating range of 15,300 to 15,800 yuan/mt (tax-exclusive).

 Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy futures contract 2511 opened at 20,010 yuan/mt, with a low of 19,945 yuan/mt, a high of 20,100 yuan/mt, and closed at 20,075 yuan/mt, up 70 yuan/mt or 0.35% from the previous trading day. The open interest was 8,333 lots, and the trading volume was 2,037 lots, with bulls increasing their positions during the day. In the spot market, yesterday, the SMM A00 aluminum price increased by 110 yuan/mt from the previous day to 20,630 yuan/mt, and the SMM ADC12 price increased by 100 yuan/mt to 20,150 yuan/mt. Yesterday, aluminum prices extended their gains. Affected by reduced new scrap output during the off-season and suppressed dismantling volumes due to high temperatures, aluminum scrap supply tightened, leading to rapid price increases. Cost pressures at secondary aluminum plants increased, and their willingness to lower prices strengthened. Today, the market generally increased prices by 100 yuan/mt. However, demand was dragged down by high temperatures, leading to a decline in downstream operating rates and a reduction in orders for secondary aluminum plants, resulting in sluggish market transactions. Overall, cost support will continue to limit the downside room for prices, while high social inventory levels and persistently weak actual demand will suppress price increases. It is expected that ADC12 prices will maintain a fluctuating rangebound pattern in the short term.

Summary: On the macro front, Trump's imposition of a 25% tariff (total tariff rate of 50%) on India has exacerbated trade friction risks, which will inhibit the transmission of global industrial chain demand, and aluminum semis exports are expected to be weak. Expectations for US Fed interest rate cuts have heated up (with two potential cuts this year), suppressing the US dollar and providing bottom support for commodities. On the fundamental front, in terms of supply, domestic operating aluminum capacity has remained stable, with the proportion of liquid aluminum pulling back and an increase in casting ingot volumes, leading to more marketable supplies and a continuous inventory buildup in social inventory, which has suppressed aluminum price increases. Demand side, downstream off-season sentiment persists, spot purchasing as needed remains sluggish, spot premiums lack upward momentum. PV, NEV, and home appliance sheet sectors remain in the off-season. Despite declining aluminum prices, processing plants' orders on hand show no significant improvement trend. Short term, spot premiums and discounts are in the doldrums, expected to maintain a pressured pattern. However, macro front easing expectations intensify. After the off-season ends and policy implementation takes effect, aluminum prices still possess rebound momentum. Whether subsequent prices can break through depends on August's inventory trajectory during the off-to-peak season transition and consumption recovery signals.

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