Macro tailwinds support aluminum prices fluctuating at highs, while weak off-season consumption brings pullback pressure [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Summary on August 14

Futures: On Wednesday night session, the most-traded SHFE aluminum 2509 contract opened at 20,780 yuan/mt, with a highest price of 20,790 yuan/mt, a lowest price of 20,635 yuan/mt, and closed at 20,655 yuan/mt. Trading volume was 41,100 lots, and open interest was 212,000 lots. On Wednesday, LME aluminum opened at $2,622.5/mt, with a peak of $2,640/mt, a trough of $2,608/mt, and closed at $2,608.5/mt.

Macro: (1) According to the financial statistics data report for July released by the central bank, China's social financing scale increment from January to July was 23.99 trillion yuan, an increase of 5.12 trillion yuan compared to the same period last year. At the end of July, the balance of broad money (M2) was 329.94 trillion yuan, up 8.8% YoY. (Bullish★) (2) On August 12 local time, as the US federal government continued to accumulate debt at a record pace, the total US national debt exceeded $37 trillion for the first time. The chairman of the Committee for a Responsible Federal Budget stated that the US fiscal situation was seriously unbalanced, but Congress continued to exacerbate the situation. (Bearish★) (3) US Treasury Secretary Bessent: Optimistic about the US Fed's September meeting, with a possibility of a 50 basis point interest rate cut; a series of consecutive interest rate cuts may follow; currently, the US Fed's interest rate should be further reduced by 150 to 175 basis points. (Bullish★)

Fundamentals: (1) According to inventory data released by the London Metal Exchange (LME) on August 13, LME aluminum inventory increased by 1,525 mt or 0.32% to 478,625 mt. The Port Klang warehouse saw the largest change, with an increase of 1,525 mt. (Bearish★) (2) According to SMM's domestic three-region aluminum ingot inventory data, domestic electrolytic aluminum ingot inventory was 428,500 mt on August 13, a destocking of 4,000 mt compared to the previous trading day. (Bullish★) (3) According to SMM's latest monthly data survey, the total production of aluminum rods nationwide in July 2025 was 360,500 mt, a decrease of 29,600 mt from June. Against the backdrop of continuous expansion of aluminum rod capacity, after excluding the impact of the number of days in the month, the operating rate of aluminum rod plants in July was only 53.2%, down 6.89% MoM and 6.7% YoY. Under the triple pressure of continuous accumulation of in-plant inventory, dismal downstream demand, and persistently high aluminum prices, aluminum rod plants were forced to choose production cuts and maintenance due to financial pressure, leading to a significant MoM decline in the operating rate. (Bearish★)

Primary Aluminum Market: On Wednesday morning, the price center of SHFE aluminum continued to fluctuate at highs from the night session. The spot market performed moderately today. Despite the upward movement of the price center, transactions in east China were still at a premium to the online price, while central China saw a slight discount, indicating continued market support. Specifically, in east China, spot market sellers mainly quoted SMM+10 in the early morning, with subsequent transactions at SMM+10. There was still demand for long-term contract purchases in the market. On Wednesday, the purchasing sentiment for electrolytic aluminum in east China was 3.10, and the selling sentiment was 2.91 (historical data can be accessed through the database). On Wednesday, SMM A00 aluminum was quoted at 20,760 yuan/mt, up 120 yuan/mt from the previous trading day, with a discount of 20 yuan/mt against the 2508 contract, narrowing by 10 yuan/mt from the previous trading day. Trading in the central China market was moderate on Wednesday, with downstream purchasing capacity weakening after the price increase. However, compared to the significant discounts seen in the market under earlier high prices, the spot market on Wednesday was mainly characterized by a small discount, with a discount of 10 yuan/mt against SMM central China prices. The price spread between central China and Shanghai slightly widened to 110 yuan/mt. On Wednesday, SMM central China prices were quoted at 20,650 yuan/mt, with a discount of 130 yuan/mt against the 2508 contract. The purchasing sentiment for primary aluminum in the central China region on Wednesday was 2.62, while the selling sentiment was 2.87 (historical data can be accessed through the database).

Recycled aluminum raw materials: On Wednesday, the spot price of primary aluminum increased by 120 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,760 yuan/mt, with aluminum scrap market prices generally following the increase. During the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with purchases mainly driven by immediate needs. On Wednesday, the centralized quotes for baled UBC aluminum scrap ranged from 15,500 to 16,000 yuan/mt (tax-exclusive), while the centralized quotes for shredded aluminum tense scrap (water price) ranged from 17,100 to 17,600 yuan/mt (tax-exclusive). Baled UBC aluminum scrap prices increased by 50 yuan/mt from Tuesday, while shredded aluminum tense scrap (water price) and automotive/motorcycle wheel hub prices increased by 100 yuan/mt from Tuesday. Regionally, Shanghai, Jiangsu, Shandong, Jiangxi, and other regions closely followed aluminum price movements, with price adjustments ranging from 50 to 100 yuan/mt. In Hubei, prices on Wednesday remained flat compared to Tuesday. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan narrowed by 8 yuan/mt from yesterday to 1,972 yuan/mt, while the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed by 15 yuan/mt from Tuesday to 1,941 yuan/mt. This week, the price center of the aluminum scrap market was expected to further return to off-season levels. However, due to the impact of the transitional period of policies related to secondary aluminum, it may push up the prices of raw material purchases. The tight supply of shredded aluminum tense scrap (water price) resources is expected to intensify, with the operating range likely fluctuating between 17,000 and 17,500 yuan/mt (tax-exclusive). Baled UBC aluminum scrap remains 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, on Wednesday, the most-traded cast aluminum alloy futures contract 2511 opened at 20,210 yuan/mt, reaching a high of 20,270 yuan/mt and a low of 20,165 yuan/mt, before closing at 20,200 yuan/mt, up 60 yuan/mt or 0.30% from the previous trading day. The open interest was 8,644 lots, and the trading volume was 2,238 lots, with bears reducing their positions mainly during the day. In the spot market, on Wednesday, SMM A00 aluminum prices increased by 120 yuan/mt from the previous day to 20,760 yuan/mt, while SMM ADC12 prices increased by 100 yuan/mt to 20,350 yuan/mt. On Wednesday, the aluminum price rally widened, and under undersupply, aluminum scrap prices followed the increase at a faster pace, generally rising by 50 to 100 yuan/mt, further pushing up ADC12 prices. In August, the secondary aluminum alloy market remained constrained by tight aluminum scrap supply, with sustained cost pressure on enterprises supporting ADC12 prices. However, lackluster consumption limited upside price potential, and secondary aluminum alloy prices are expected to hold up well within a narrow range. Short-term focus should center on the pace of end-use demand recovery and improvements in aluminum scrap supply.

Summary: Macro side, mild US inflation data reinforced expectations for a US Fed interest rate cut in September and boosted bets on further policy easing later this year. Fundamentally, supply side saw limited changes, with aluminum production remaining stable with minor increases. Cost side, the weekly total industry cost for aluminum stood at 16,738 yuan/mt, showing minimal variation, while high industry profitability persisted. Demand side, consumption from end-users to processed products remained weak amid off-season effects. Growth in previously strong sectors like home appliances and PV slowed down, while some aluminum end-use export orders declined. The construction sector continued to underperform seasonal trends. With aluminum prices at elevated levels during the off-season, consumption may face further erosion, and short-term inventory buildup trends are unlikely to reverse. Overall, domestic and overseas macro tailwinds coupled with potential aluminum supply risks drove prices higher, but persistent inventory buildup pressure during the consumption off-season remains. After bullish sentiment is digested, the aluminum price center is expected to pull back, with the 21,000 yuan/mt level remaining under pressure.

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