Under the game between macro and fundamentals, aluminum prices will hold up well in the short term but there is risk of correction [SMM Aluminum Morning Meeting Summary]

SMM Aluminum Morning Meeting Notes on August 15

Futures: On Thursday night session, the most-traded SHFE aluminum 2509 contract opened at 20,710 yuan/mt, with a highest price of 20,785 yuan/mt, a lowest price of 20,705 yuan/mt, and closed at 20,760 yuan/mt. Trading volume was 43,000 lots, and open interest was 198,000 lots. On Thursday, LME aluminum opened at $2,606/mt, with a highest point of $2,627.5/mt, a lowest point of $2,606/mt, and closed at $2,624/mt.

Macro: (1) Announcement by the People's Bank of China: To maintain ample liquidity in the banking system, on August 15, 2025, the People's Bank of China will conduct a 500 billion yuan outright reverse repo operation through fixed quantity, interest rate tendering, and multiple price winning bids, with a term of 6 months (182 days). (Bullish ★) (2) The US Bureau of Labor Statistics announced on Thursday that the Producer Price Index (PPI) for final demand in the US rose by 0.9% MoM in July, after being flat in June. Economists had previously forecast a 0.2% increase in PPI. (Bullish ★)

Fundamentals: (1) According to SMM statistics, as of August 14, the aluminum billet inventory in major domestic consumption areas was 138,500 mt, down 8,500 mt from Monday and 4,000 mt from last Thursday. (Bullish ★) (2) This week, the operating rate of the domestic aluminum extrusion industry increased by 1 percentage point MoM to 50.5%. The comprehensive operating rate of sampled enterprises increased slightly, mainly due to new orders for automotive and PV extrusions from some enterprises. (Bullish ★)

Primary Aluminum Market: On Thursday, the center of SHFE aluminum prices pulled back to sideways movement within the 20,650-20,690 yuan/mt range. In the first trading session of Thursday in Shanghai and Henan, suppliers offered goods at a small premium, with increased shipments, but actual transactions were not as good as earlier. Specifically, in east China, in the morning spot market, sellers mainly quoted at SMM+10, and later transactions were concluded at SMM+10. The demand for long-term contract purchases remained, but as shipments increased, transactions were not as smooth as the previous trading day. On Thursday, the purchasing sentiment for electrolytic aluminum in east China was 2.88, and the selling sentiment was 2.71 (historical data can be queried in the database). On Thursday, SMM A00 aluminum was reported at 20,710 yuan/mt, down 50 yuan/mt from the previous trading day, with a premium of 10 yuan/mt against the 2508 contract, narrowing by 30 yuan/mt from the previous trading day. In the central China market, transactions on Thursday were average. Pre-market transactions were mainly on par with SMM central China. After the market opened, premium quotes emerged, but actual transactions were concentrated at a premium of 10 yuan/mt against SMM central China. The price spread between Henan and Shanghai remained stable at 110 yuan/mt. On Thursday, SMM central China was reported at 20,600 yuan/mt, with a discount of 100 yuan/mt against the 2508 contract. On Thursday, the purchasing sentiment for electrolytic aluminum in central China was 2.90, and the selling sentiment was 2.81 (historical data can be queried in the database).

Recycled Aluminum Raw Materials: On Thursday, the price of primary aluminum spot decreased by 50 yuan/mt from the previous trading day. SMM A00 spot aluminum closed at 20,710 yuan/mt, and the aluminum scrap market price remained stable overall. Currently in the traditional off-season, downstream scrap utilization enterprises are experiencing weak order releases, with purchases primarily driven by immediate needs. On Thursday, the centralized quoted price for baled UBC aluminum scrap ranged from 15,500 to 16,000 yuan/mt (tax-exclusive), while the centralized quoted price for shredded aluminum tense scrap (with water content) ranged from 17,100 to 17,600 yuan/mt (tax-exclusive price). The prices of baled UBC, shredded aluminum tense scrap (with water content), and automotive and motorcycle wheel hubs remained unchanged compared to the previous day. 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 60 yuan/mt from the previous day to 1,912 yuan/mt, while the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai increased slightly by 4 yuan/mt from the previous day to 1,945 yuan/mt. It is expected that the price center of the aluminum scrap market will move further upward next week. Affected by the transitional period of policies related to secondary aluminum, this will drive up the prices of raw material purchases. The tight supply of shredded aluminum tense scrap (with water content) resources will intensify, with the operating range expected to fluctuate between 17,100 and 17,600 yuan/mt (tax-exclusive). Supported by the consumption of downstream can stock enterprises, the operating range of baled UBC is expected to be between 15,500 and 16,000 yuan/mt (tax-exclusive).

Secondary aluminum alloy: On the futures market, on Thursday, the most-traded cast aluminum alloy futures contract 2511 opened at 20,175 yuan/mt, reaching a high of 20,195 yuan/mt and a low of 20,080 yuan/mt, before closing at 20,140 yuan/mt, down 60 yuan/mt or 0.30% from the previous trading day. The open interest was 8,312 lots, and the trading volume was 1,639 lots, with bulls reducing their positions mainly during the day. In the spot market, on Thursday, the SMM A00 aluminum price fell by 50 yuan/mt from the previous day to 20,710 yuan/mt, while the SMM ADC12 price remained stable at 20,350 yuan/mt. Today, aluminum prices dropped back slightly, and the secondary aluminum market remained largely stable amid high costs. In the short term, cost support and policy disruptions may continue to support prices fluctuating upward, but weak demand and inventory buildup pressure will limit upside room. It is necessary to monitor the implementation of policies and the pace of demand recovery during the peak season.

Summary: On the macro front, although Thursday's US data did not shake the rationale for an interest rate cut in September, it did raise market concerns that tariffs could still stimulate inflation in the coming months and alter the interest rate cut trajectory for the remainder of the year. From a fundamental perspective, there have been relatively small changes in terms of supply, with the operating production of electrolytic aluminum showing a steady and slight increase. Regarding costs, the total weekly cost for the electrolytic aluminum industry was 16,738 yuan/mt, with the industry still enjoying high profits. On the demand side, as the September-October peak season approaches, downstream weekly operating rates have shown signs of recovery this week. However, under the influence of the off-season, it is difficult for consumption from terminals to processed materials to exceed expectations. The growth rates of industries such as home appliances and PV, which had strong support in the early stage, have slowed down. Some aluminum terminal export orders have also declined, and the construction industry is still experiencing a super-seasonal decline. Amid the off-season atmosphere, aluminum prices are fluctuating at highs, while consumption recovery remains relatively weak. Against the backdrop of still sufficient supply, the trend of continued inventory buildup in the short term remains unchanged. Overall, domestic and overseas macro tailwinds coupled with potential supply risks in aluminum kept prices holding up well. However, during the off-season, inventory buildup pressure remained significant. After the positive sentiment is digested, the price center of aluminum may face the risk of jumping initially and then pulling back, with the 21,000 yuan/mt level still under pressure.

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