Macro Headwinds and Tailwinds Intertwined, Aluminum Prices Continue to Fluctuate [SMM Aluminum Morning Meeting Summary]

8.2 SMM Aluminum Morning Meeting Summary

Futures: On Tuesday night, the most-traded SHFE aluminum 2510 contract opened at 20,540 yuan/mt, with the highest price at 20,540 yuan/mt, the lowest price at 20,480 yuan/mt, and closed at 20,490 yuan/mt. The trading volume was 45,800 lots, and the open interest was 234,000 lots. LME aluminum opened at $2,587/mt, reached a high of $2,587.5/mt, a low of $2,561/mt, and closed at $2,567.5/mt.

Macro: (1) On the 19th, the MIIT and five other departments jointly held a PV industry symposium to further regulate the competitive order of the PV industry. The meeting required: first, to strengthen industrial regulation; second, to curb disorderly competition at low prices; third, to standardize product quality; fourth, to support industry self-discipline. (Bullish ★) (2) A national teleconference on promoting trade-in policies for consumer goods emphasized the need to steadily advance the next phase of work on trade-in programs. It is necessary to implement incremental policies to boost consumption and accelerate the cultivation of new growth points in the consumer market. (Bullish ★) (3) On August 19, the US Department of Commerce announced that 407 product categories would be included in the steel and aluminum tariff list, with a tax rate of 50%. The statement from the Department of Commerce noted that the newly added list covers a wide range, including hundreds of products such as wind turbines and their components, mobile cranes, railway vehicles, furniture, compressors, and pump equipment. (Bearish ★)

Fundamentals: (1) According to SMM statistics, the combined inventory of aluminum billet in two locations, Guangdong and Wuxi, stood at 86,000 mt, with 52,000 mt in Guangdong and 34,000 mt in Wuxi, down by 1,500 mt from the previous period. (Bullish ★) (2) SMM data showed that the total social inventory of aluminum ingot in three regions on August 19 was 446,500 mt, up by 500 mt from the previous trading day. (Bearish ★)

Primary Aluminum Market: In the early session on Tuesday, the center of the front-month SHFE aluminum contract continued the trend from the night session, fluctuating rangebound around 20,550 yuan/mt. With the decline in the center of aluminum prices, the market activity in east China slightly improved, but regional inventories remained at a relatively high level, suppressing premiums, and limiting the recovery in market activity. Transactions were made at a slight premium or on par with the SMM average price. Subsequent inventory buildup in east China is likely, continuing to suppress premiums and discounts. Yesterday, SMM A00 aluminum was quoted at 20,590 yuan/mt, up 40 yuan/mt from the previous trading day, at a discount of 20 yuan/mt against the 09 contract, unchanged from the previous trading day. In the central China market, downstream buyers restocked at lower prices, leading to continued improvement in market activity, with premiums and discounts remaining stable, and transactions concluded at parity to a premium of 10 yuan/mt against the SMM central China average price. Currently, some downstream consumption in central China has started to recover marginally, showing a certain upward trend in premiums. SMM central China A00 aluminum against SHFE 2509 contract recorded 20,490 yuan/mt, up 50 yuan/mt from the previous trading day. The price spread between Henan and Shanghai narrowed by 10 yuan/mt to -100 yuan/mt, with a discount of 120 yuan/mt against the 2508 contract.

Recycled aluminum raw materials: Yesterday, the spot primary aluminum price increased by 40 yuan/mt compared to the previous trading day, with SMM A00 spot closing at 20,590 yuan/mt. The overall aluminum scrap market prices remained stable. In the current off-season, downstream scrap utilization enterprises have weak order releases, and purchases are mainly based on rigid demand. Yesterday, baled UBC scrap was concentrated at 15,400-15,900 yuan/mt (excluding tax), and shredded aluminum tense scrap (priced based on aluminum content) was concentrated at 17,100-17,600 yuan/mt (excluding tax). Baled UBC, shredded aluminum tense scrap (priced based on aluminum content), and wheel hubs for cars and motorcycles were flat MoM. In Foshan, baled UBC and aluminum radiator scrap prices decreased by 100 yuan/mt yesterday. It is expected that the aluminum scrap market prices will fluctuate at highs this week. Affected by the transitional period of relevant policies on recycled aluminum, the cost of raw material purchases is expected to rise, and the tight supply of shredded aluminum tense scrap (priced based on aluminum content) is expected to intensify, with prices fluctuating in the range of 17,100-17,600 yuan/mt (excluding tax). Baled UBC, supported by consumption from downstream can stock enterprises, is expected to operate in 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 20,100 yuan/mt, reached a low of 20,025 yuan/mt, and a high of 20,145 yuan/mt, finally closing at 20,095 yuan/mt, up 5 yuan/mt or 0.02% from the previous trading day. Open interest was 7,912 lots, and trading volume was 1,449 lots, with bulls mainly reducing their positions during the day. In the spot market, SMM A00 aluminum price rose by 40 yuan/mt to 20,590 yuan/mt, while SMM ADC12 price remained stable at 20,350 yuan/mt. Due to recent policy adjustments in some regions and a tight supply of aluminum scrap, enterprises are mainly maintaining firm quotes under high raw material costs. Demand side, the traditional off-season atmosphere continues, with no significant improvement in actual consumption, leading to mediocre performance. In the short term, cost support and policy disruptions may continue to underpin prices, but weak demand and inventory buildup pressure will limit upside room. Subsequent attention should be paid to the implementation of policies and the recovery pace of peak season demand.

Summary: MIIT held a PV industry symposium, deploying measures to strengthen investment management of PV projects, promoting the orderly exit of outdated capacity through market-based and legal means. From a fundamental perspective, there were relatively small changes in terms of supply, with aluminum production slightly increasing. On the demand side, the September-October peak season is approaching, but currently, under the influence of the off-season, the consumption from end-users to processed materials is unlikely to exceed expectations. Growth in previously strongly supportive sectors such as home appliance and PV slowed down, and some aluminum end-user export orders also declined, while the construction sector continued to experience a sharper-than-seasonal downturn. Amid the off-season atmosphere, aluminum prices fluctuated at highs, consumption recovery remained relatively weak, and against the backdrop of ample supply, the short-term inventory buildup trend persisted. Overall, domestic and overseas macro tailwinds coupled with potential supply-side risks for aluminum kept prices holding up well. However, under the off-season pressure, inventory buildup remained a significant burden. Once 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. Subsequent attention should be paid to changes in inventory and capital sentiment.

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