Macro and Fundamentals Intertwined, Aluminum Prices Hold Up Well in Short Term [SMM Aluminum Morning Meeting Summary]

8.18 SMM Aluminum Morning Meeting Summary

Futures: The most-traded SHFE aluminum 2509 contract opened at 20,695 yuan/mt during the night session, reaching a high of 20,700 yuan/mt and a low of 20,620 yuan/mt, closing at 20,660 yuan/mt, down 0.53% from the previous close. LME aluminum opened at $2,621.5/mt, reached a high of $2,631.5/mt and a low of $2,592.5/mt, closing at $2,603/mt, down 0.80%.

Macro: (1) The central bank's Q2 2025 monetary policy report emphasized the continuation of moderately loose policies, with the core goal of promoting a reasonable rebound in prices and supply-demand balance, stimulating effective demand through supply-side reforms. (Bullish ★) (2) Recently, the US Trump administration announced an expansion of the 50% tariff on steel and aluminum imports, adding hundreds of derivative products to the list. The expanded tariff list will take effect on August 18. (Bearish ★) (3) According to the Ministry of Foreign Affairs' official website, the spokesperson announced that from August 18 to 20, Wang Yi, member of the Political Bureau of the CPC Central Committee, Minister of Foreign Affairs, and Special Representative of China for the China-India Boundary Question, will visit India at the invitation and hold the 24th meeting of the Special Representatives on the China-India Boundary Question. (Neutral)

Fundamentals: (1) According to SMM statistics, domestic aluminum inventory was 607,000 mt on August 18, up 19,000 mt WoW from last Thursday and 20,000 mt WoW from last Monday. (Bearish ★) (2) Last week, the operating rate of the domestic aluminum extrusion industry increased by 1 percentage point MoM to 50.5%. The slight increase in the comprehensive operating rate of sample enterprises was mainly due to new orders for automotive and PV extrusions. (Bullish ★)

Primary Aluminum Market: In the previous trading day, the center of SHFE aluminum fluctuated. Spot premiums and discounts in Shanghai and Henan changed frequently and gradually weakened. Specifically, in east China, the spot market opened with offers mainly at SMM+10, followed by transactions at parity and -10. Market transactions were weaker than the early part of last week, with more sellers and buyers driving down prices. The purchasing sentiment for electrolytic aluminum in east China was 2.77, and the selling sentiment was 2.90 (historical data can be queried in the database). SMM A00 aluminum was quoted at 20,710 yuan/mt, unchanged from the previous trading day, on par with the 2508 contract, with the spread widening by -10 yuan/mt. In the central China market, transactions were average, and spot premiums and discounts also showed a weakening trend. Actual transactions were concentrated at a discount of 10 yuan/mt to SMM central China, with the price difference between Henan and Shanghai remaining stable at 120 yuan/mt. SMM central China was quoted at 20,590 yuan/mt, at a discount of 120 yuan/mt to the 2508 contract. In the previous trading day, the aluminum purchase sentiment in central China was 2.66, and the selling sentiment was 2.73 (historical data can be queried by logging into the database). Recycled aluminum raw materials: The spot primary aluminum price remained flat compared to the previous trading day, with SMM A00 spot closing at 20,710 yuan/mt, and the overall aluminum scrap market prices were stable. In the current traditional off-season, downstream scrap utilization enterprises showed weak order releases, with purchases mainly driven by rigid demand. In the previous trading day, baled UBC scrap aluminum was concentratedly quoted at 15,500-16,000 yuan/mt (excluding tax), and shredded aluminum tense scrap (priced based on aluminum content) was concentratedly quoted at 17,100-17,600 yuan/mt (excluding tax). Baled UBC, shredded aluminum tense scrap (priced based on aluminum content), and wheel hubs from cars and motorcycles remained unchanged MoM. It is expected that the price center of the aluminum scrap market will further move upward this week. Affected by the transitional period of relevant policies for recycled aluminum, the cost of raw material purchases is likely to rise, and the tight supply situation of shredded aluminum tense scrap (priced based on aluminum content) will intensify, with the operating range fluctuating between 17,100-17,600 yuan/mt (excluding tax); supported by the consumption of downstream can stock enterprises, baled UBC is expected to operate within the range of 15,500-16,000 yuan/mt (excluding tax).

Secondary aluminum alloy: On the futures side, the most-traded cast aluminum alloy futures contract 2511 opened at the lowest point of 20,115 yuan/mt, reached a high of 20,225 yuan/mt, and finally closed at 20,165 yuan/mt, up 25 yuan/mt or 0.12% from the previous trading day. Open interest stood at 8,161 lots, with a trading volume of 1,392 lots, and bears mainly reduced their positions during the day. In the spot market, the SMM A00 aluminum price remained unchanged at 20,710 yuan/mt compared to the previous day, and the SMM ADC12 price held steady at 20,350 yuan/mt. With the aluminum price remaining stable in the previous trading day, there was insufficient sentiment for price adjustments in the recycled aluminum market, and prices stayed stable. Recently, many local governments have been clearing and abolishing non-compliant fiscal rebate and subsidy policies; affected by this policy adjustment, some recycled aluminum plants have taken measures such as reducing or halting production to observe the subsequent policy implementation trends. Consumption remains sluggish in the traditional off-season, with no significant improvement in actual demand, and overall transactions were sluggish. 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, requiring attention to the progress of policy implementation and the pace of peak season demand recovery.

Summary: Overall, on the macro front, PBOC's Q2 2025 monetary policy report emphasized the continuation of moderately loose policies, focusing on price rebound and supply-demand balance; the US Trump administration announced an expansion of the 50% tariff on steel and aluminum imports. Amidst the off-season atmosphere, aluminum prices fluctuated at highs, with relatively weak consumption recovery. Given the still ample supply, the trend of continued inventory buildup in the short term remains unchanged. Overall, macro tailwinds both domestically and overseas, coupled with potential supply risks in aluminum, kept aluminum 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. Subsequent attention should be paid to changes in inventory and capital sentiment.

[Data source statement: Except for publicly available information, other data are processed by SMM based on public information, market exchanges, and SMM's internal database model, for reference only and not constituting decision-making advice.]