Aluminum prices are under pressure at a high level, waiting to pull back. The market is waiting for guidance from CPI data [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on August 12

Futures: On Monday night, the most-traded SHFE aluminum 2509 contract opened at 20,630 yuan/mt, with a high of 20,645 yuan/mt, a low of 20,585 yuan/mt, and closed at 20,610 yuan/mt. Trading volume was 30,200 lots, and open interest was 209,000 lots. On Monday, LME aluminum opened at $2,606/mt, with a high of $2,624/mt, a low of $2,583/mt, and closed at $2,586/mt.

Macro: (1) As of June, US companies bore 64% of the tariff costs, consumers bore 22%, and foreign exporters bore 14%. However, as the tariff implementation period extends, it is projected that by October, consumers will bear 67% of the costs, while the proportion borne by companies will drop to less than 10%. (Bullish ★) (2) The Chongqing Municipal Energy Administration and the Central China Regulatory Bureau of the National Energy Administration recently issued the "Implementation Rules for the Development, Construction, and Management of Distributed Photovoltaic Power Generation in Chongqing". The document clarifies that for general industrial and commercial distributed PV projects that adopt the self-consumption and surplus electricity fed into the grid model, different proportions of self-consumption electricity will be determined based on the distribution of power loads within the city. (Neutral)

Fundamentals: (1) According to SMM statistics, during the period from August 4 to August 10, the total outflows from warehouses of domestic aluminum ingots were 109,200 mt, a decrease of 1,500 mt MoM. (Bearish ★) (2) According to SMM statistics, during the period from August 4 to August 10, the total outflows from warehouses of domestic aluminum billets were 50,000 mt, an increase of 2,500 mt MoM. (Bullish ★) (3) The monthly information on power batteries for July released by the China Automotive Power Battery Industry Innovation Alliance on the 11th shows that in July, the combined production of power and other batteries in China was 133.8 GWh, up 3.6% MoM and 44.3% YoY. In July, the sales of power and other batteries in China were 27.2 GWh, down 3.2% MoM and up 47.8% YoY. Among them, the sales of power batteries were 91.1 GWh, accounting for 71.6% of the total sales, down 3.1% MoM and up 45.8% YoY; the sales of other batteries were 36.1 GWh, accounting for 28.4% of the total sales, down 3.4% MoM and up 52.9% YoY. (Neutral)

Primary Aluminum Market: On Monday morning, the center of the SHFE aluminum futures market maintained a fluctuating trend. Despite a significant inventory buildup in the social inventory today, suppliers refused to budge on prices as the delivery date approached, and spot premiums/discounts remained stable. Specifically, in east China, the morning spot market mainly saw transactions at the average price, with a small amount of SMM+10 transactions appearing later. In addition, the off-season atmosphere was strong in the downstream sector, with just-in-time procurement being the main activity, showing no significant improvement. On Monday, the procurement sentiment for electrolytic aluminum in east China was 2.80, and the shipping sentiment was 2.77 (historical data can be queried in the database). On Monday, SMM A00 aluminum was quoted at 20,630 yuan/mt, down 20 yuan/mt from the previous trading day, trading at a discount of 50 yuan/mt against the 2508 contract, unchanged from the previous trading day. In the central China market, self pick-up cargo was traded at parity with SMM central China prices early on Monday morning, with prices for +10 and +20 deliveries to the market remaining strong, indicating continued reluctance to budge on prices. However, due to the lack of significant improvement in downstream demand, overall transactions were concentrated around the average price, driving the price spread between Henan and Shanghai to narrow continuously to 110 yuan/mt. On Monday, SMM central China reported a price of 20,520 yuan/mt, trading at a discount of 160 yuan/mt against the 2508 contract. Today, the purchasing sentiment for primary aluminum in the central China region is 2.99, and the selling sentiment is 2.72 (historical data can be accessed through the database).

Recycled aluminum raw materials: On Monday, the spot price of primary aluminum fell by 20 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,630 yuan/mt, and aluminum scrap market prices remaining generally unchanged. Amid the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with purchases primarily driven by immediate needs. On Monday, baled UBC aluminum scrap was concentratedly quoted at 15,350-15,850 yuan/mt (tax not included), while shredded aluminum tense scrap (water price) was concentratedly quoted at 17,000-17,500 yuan/mt (tax not included). Baled UBC aluminum scrap prices fell by 50 yuan/mt from the previous day, while shredded aluminum tense scrap (water price) and automotive/motorcycle wheel hub prices remained stable MoM. This week, the price center of the aluminum scrap market was expected to further return to off-season levels, but due to the impact of the transitional period for policies related to secondary aluminum, it may push up raw material purchase prices. The tight supply of shredded aluminum tense scrap (water price) resources is expected to intensify, with the operating range likely fluctuating between 17,000-17,500 yuan/mt (tax not included). Baled UBC aluminum scrap remains suppressed by weak end-use demand, with an operating range of 15,300-15,800 yuan/mt (tax not included).

Secondary aluminum alloy: On the futures market, on Monday, the most-traded cast aluminum alloy 2511 futures contract opened at 20,110 yuan/mt, reaching a high of 20,165 yuan/mt and a low of 20,050 yuan/mt, before closing at 20,135 yuan/mt, up 25 yuan/mt or 0.12% from the previous trading day. The open interest was 8,606 lots, and the trading volume was 1,008 lots, with bulls mainly increasing their positions during the day. In the spot market, on Monday, the SMM A00 aluminum price fell by 20 yuan/mt from the previous day to 20,630 yuan/mt, while the SMM ADC12 price remained unchanged at 20,250 yuan/mt. On Monday, aluminum prices continued their slight correction, with secondary aluminum market quotes remaining stable and cautious. In August, the secondary aluminum market remains constrained by tight aluminum scrap supply, with enterprises facing continuous cost pressure, supporting ADC12 prices. However, the lack of significant improvement in consumption will limit the price increase space, and it is expected that secondary aluminum alloy prices will fluctuate rangebound at the beginning of the month. In the short term, close attention should be paid to the progress of end-use demand recovery and the improvement of aluminum scrap supply.

Summary: On the macro front, US Fed officials are increasingly uneasy about the labour market, indicating their openness to an interest rate cut as early as September. Cooling inflation may reinforce bets on an interest rate cut next month, but signs that US President Trump's tariffs are fueling price increases could prompt the US Fed to hold off for now. Fundamentally, in terms of supply, aluminum production remained relatively stable with minor increases. Cost side, the weekly total industry cost for aluminum stood at 16,738 yuan/mt, showing minimal change, with high industry profits persisting. Key focus, demand side, currently under off-season effects, consumption from end-users to processed materials continues to weaken. Growth in previously strong supporting sectors like home appliances and PV has slowed, while some aluminum export orders have declined, and the construction sector remains in a seasonally weak phase. Social inventory for aluminum has breached the 550,000 mt threshold. Although uneven arrivals caused temporary inventory data fluctuations last week, high aluminum prices amid off-season sentiment may further dampen consumption, with the short-term inventory buildup trend unlikely to reverse. Overall, macro tailwinds coupled with potential aluminum supply risks have driven prices to elevated levels, but off-season demand keeps inventory buildup pressure significant. Once positive sentiment is digested, the aluminum price center is expected to pull back, with the 21,000 yuan/mt level remaining under pressure. Similarly, most processors show higher acceptance for prices below 20,500 yuan/mt, where just-in-time procurement capacity has been somewhat 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 this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]