Expectations for US Fed interest rate cut rise, aluminum prices remain under pressure amid off-season consumption [SMM Aluminum Morning Meeting Summary]

8.8 SMM Aluminum Morning Meeting Summary

Futures: Last night, the most-traded SHFE aluminum 2509 contract opened at 20,715 yuan/mt, with a high of 20,725 yuan/mt, a low of 20,655 yuan/mt, and closed at 20,670 yuan/mt. Trading volume was 39,000 lots, and open interest was 229,000 lots. Last night, LME aluminum opened at $2,612.5/mt, with a high of $2,613.5/mt, a low of $2,610.5/mt, and closed at $2,612.5/mt.

Macro: (1) Reciprocal tariffs officially took effect, with Trump stating that billions of dollars would begin flowing into the US. (Bearish ★) (2) US Treasury Secretary Bessent said that the interview process for the new Fed Chairman had begun. Additionally, it was reported that Fed Governor Waller was considered a priority candidate for the Fed Chairman position by Trump's team. (Neutral ★)

Fundamentals: (1) On August 7, SMM statistics showed that the inventory of primary aluminum in the Shanghai Bonded Zone was 91,300 mt, and in the Guangdong Bonded Zone was 20,000 mt, totaling 111,300 mt. Inventory increased by 3,800 mt WoW. (Bearish ★) (2) According to data from the General Administration of Customs, China's exports of unwrought aluminum and aluminum semis reached 542,000 mt in July 2025, down 7.7% YoY and up 10.84% MoM. From January to July, cumulative exports reached 3.461 million mt, down 7.9% YoY. (Neutral ★) (3) According to SMM statistics, on August 7, the inventory of primary aluminum ingots in major domestic consumption areas was 564,000 mt, unchanged from Monday and up 20,000 mt from Thursday last week. (Neutral ★)

Primary Aluminum Market: Yesterday morning, the center of the front-month SHFE aluminum contract continued to climb to a high above 20,800 yuan/mt, fluctuating rangebound. In east China, aluminum prices rose to around 20,800 yuan/mt, with many market sellers, but downstream enterprises showed weak purchasing power, making it difficult to achieve premium transactions. Transactions between traders also fell from average price transactions to -5 to -10 yuan/mt. Yesterday, SMM A00 aluminum was reported at 20,690 yuan/mt, up 60 yuan/mt from the previous trading day, with a discount of 50 yuan/mt against the 08 contract, down 10 yuan/mt 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 early decline in aluminum prices, 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 continued to rise to above 20,800 yuan/mt, with a noticeable lack of upward momentum in central China premiums. Premiums showed a high-opening and low-closing pattern, with transactions against the SMM central China average price falling from parity to around a discount of 20 yuan/mt. SMM central China A00 aluminum was recorded at 20,580 yuan/mt against the SHFE aluminum 2508 contract, up 40 yuan/mt from the previous trading day, with a price spread of -110 yuan/mt between central China and Shanghai, expanding by 20 yuan/mt from the previous trading day, and a discount of 160 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: Yesterday, the spot price of primary aluminum continued to rise by 60 yuan/mt compared to the previous trading day. SMM A00 spot aluminum closed at 20,690 yuan/mt, and the overall market price of aluminum scrap increased. Currently in the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with purchases mainly driven by immediate needs. Yesterday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,400 to 15,900 yuan/mt (tax not included), while the centralized quoted price for shredded aluminum tense scrap (water price) ranged from 17,100 to 17,600 yuan/mt (tax not included). Baled UBC aluminum scrap prices rose by 50 yuan/mt MoM from yesterday, while shredded aluminum tense scrap (water price) and aluminum scrap for automobile and motorcycle wheel hubs increased by 100 yuan/mt MoM from yesterday. According to feedback from producers, there are two reasons for this: firstly, the shortage 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. In terms of the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mechanical casting aluminum scrap in Foshan narrowed by 232 yuan/mt MoM from Monday to 1,736 yuan/mt. The price adjustment range for aluminum tense scrap raw materials far exceeded that of A00 aluminum, resulting in a rapid narrowing of the price difference between A00 aluminum and aluminum scrap in the short term.

Secondary aluminum alloy: On the futures market, yesterday, the most-traded cast aluminum alloy 2511 futures contract opened at 20,160 yuan/mt, with a low of 20,115 yuan/mt and a high of 20,215 yuan/mt, eventually closing at 20,135 yuan/mt, up 60 yuan/mt or 0.30% from the previous trading day. The open interest was 8,695 lots, and the trading volume was 1,954 lots, with bulls mainly increasing their positions during the day. In the spot market, yesterday, the SMM A00 aluminum price increased by 60 yuan/mt from the previous day to 20,690 yuan/mt, while the SMM ADC12 price increased by 100 yuan/mt to 20,250 yuan/mt. The aluminum scrap price quickly followed the rise in aluminum prices during the week, and the cost-side pressure increased, fueling market sentiment for price adjustments. In August, the secondary aluminum market remained constrained by tight aluminum scrap supply, with enterprises facing continuous cost pressure, supporting the upward trend in ADC12 prices. However, weak consumption and high social inventory levels will limit price increases, and it is expected that secondary aluminum alloy prices will remain in a narrow range with a relatively strong bias at the beginning of the month. In the short term, it is necessary to closely monitor the progress of end-use demand recovery and the improvement of aluminum scrap supply.

Summary: On the macro front, expectations for US Fed interest rate cuts have risen, and macro sentiment remains positive, providing a boost to base metals. The US has imposed a tariff hike on India, while India and Russia have signed a deepened cooperation agreement on aluminum, leading to a subtle increase in risk-averse sentiment among funds. From a fundamental perspective, there have been relatively small changes in terms of supply, with the operating production of primary aluminum showing a steady to slight increase. On the cost side, the total weekly cost for the primary aluminum industry was 16,738 yuan/mt, with minimal changes, and the industry's high profits persist. Key focus is on demand, which remains weak under the influence of the off-season, with consumption from end-users to processed materials continuing to decline. Industries such as home appliances and PV, which previously provided strong support, have seen a slowdown in growth, and some aluminum end-use export orders have also declined. The construction industry continues to experience a super-seasonal decline. The aluminum social inventory has breached the 550,000 mt threshold. Although uneven arrivals caused periodic inventory fluctuations during the week, the high aluminum prices amid the off-season atmosphere may further dampen consumption, with the short-term inventory buildup trend remaining unchanged. Overall, macro optimism coupled with potential aluminum supply risks drove prices to rebound to elevated levels. However, inventory buildup pressure persists during the consumption off-season. After the bullish sentiment is digested, the price center is expected to pull back, with the 21,000 yuan/mt level still facing pressure. Similarly, most semis processors show higher acceptance for prices below 20,500 yuan/mt, where just-in-time procurement capacity has been partially validated.

[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 it to replace independent judgment. Any decisions made by clients are unrelated to SMM.]