Off-Season Pressure Persists but Peak Season Expectations Heat Up, Aluminum Prices Maintain a Volatile Pattern [SMM Aluminum Morning Meeting Summary]

8.22 SMM Aluminum Morning Meeting Summary

Futures: In the previous trading night session, the most-traded SHFE aluminum 2510 contract opened at 20,590 yuan/mt, reached a high of 20,730 yuan/mt, a low of 20,585 yuan/mt, and closed at 20,720 yuan/mt, up 0.63% from the previous close. LME aluminum opened at $2,577/mt, hit a high of $2,594.5/mt, a low of $2,568.5/mt, and closed at $2,593/mt, up 0.62% from the previous close.

Macro: (1) The National Energy Administration released the July total electricity consumption, reaching 102 billion kWh, up 8.6% YoY. This is double the amount from ten years ago, equivalent to the annual electricity consumption of ASEAN countries. (Bullish ★) (2) The US and EU have reached a trade agreement framework, with the EU committing to purchase US energy (liquefied natural gas, oil, nuclear), AI chips, and defense equipment, targeting $750 billion in energy purchases by 2028. (Neutral)

Fundamentals: (1) On August 21, SMM statistics showed that the Shanghai Bonded Zone aluminum inventory was 81,900 mt, Guangdong bonded zone inventory was 20,000 mt, totaling 101,900 mt, down 2,900 mt WoW. (Neutral) (2) According to SMM, domestic aluminum billet inventories in two locations were as follows: 51,500 mt in Guangdong and 31,000 mt in Wuxi, totaling 82,500 mt, down 3,000 mt WoW. (Bullish ★) (3) SMM data on August 21 indicated that the social inventory of secondary aluminum alloy ingots in major domestic consumption areas was 35,144 mt, down 11 mt from the previous Thursday. (Neutral)

Primary Aluminum Market: Yesterday morning, the front-month SHFE aluminum contract's center moved up to around 20,650 yuan/mt and fluctuated rangebound. Although the aluminum price center rebounded, the demand for long-term contract deliveries increased, with transactions at a premium of 10-20 yuan/mt. The East China market's delivery sentiment index was 3.26, down 0.07; the purchasing sentiment index was 3.31, up 0.15. SMM A00 aluminum was quoted at 20,680 yuan/mt, up 160 yuan/mt from the previous trading day, at a premium of 20 yuan/mt against the 2509 contract, up 20 yuan/mt from the previous trading day. After the aluminum price rebounded in the Central China market, downstream purchasing sentiment significantly decreased, with premiums and discounts moving downwards after a higher opening, ranging from a premium of 5 yuan/mt, parity, to -10, -20 yuan/mt. The Central China region's delivery sentiment index was 2.97, down 0.44; the purchasing sentiment index was 2.83, down 0.26. SMM Central China A00 aluminum was recorded at 20,580 yuan/mt against the SHFE 2509 contract, up 140 yuan/mt from the previous trading day, with the price spread between Central China and SHFE at -100 yuan/mt, widening by 20 yuan/mt from the previous trading day, at a discount of 80 yuan/mt against the 2509 contract.

Recycled aluminum raw materials: The spot primary aluminum price increased by 160 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,680 yuan/mt. The overall aluminum scrap market prices also rose. In the current traditional off-season, downstream scrap utilization enterprises have weak order releases, and purchases are mainly based on rigid demand. Yesterday, baled UBC was concentratedly quoted at 15,400-15,900 yuan/mt (excluding tax), and shredded aluminum tense scrap (priced based on aluminum content) was concentratedly quoted at 17,200-17,700 yuan/mt (excluding tax). Baled UBC prices decreased by 50 yuan/mt MoM, while shredded aluminum tense scrap (priced based on aluminum content) and wheel hubs (both automotive and motorcycle) prices increased by 100 yuan/mt MoM. Prices for aluminum tense scrap in Jiangxi and Anhui regions collectively increased by 100 yuan/mt, making it increasingly difficult to purchase aluminum scrap. 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 increased by 150 yuan/mt to 1,892 yuan/mt compared to the previous day, while the price difference between A00 aluminum and mechanical casting aluminum scrap in Shanghai narrowed slightly by 16 yuan/mt to 1,998 yuan/mt. It is expected that next week, aluminum scrap market prices will continue to fluctuate at highs. Shredded aluminum tense scrap (priced based on aluminum content) resources are becoming tighter, with prices expected to fluctuate within the range of 17,100-17,600 yuan/mt (excluding tax); baled UBC, supported by downstream can stock and other scrap utilization enterprise consumption, is expected to operate within the range of 15,500-16,000 yuan/mt (excluding tax). Recently, many regions have initiated special clean-up work for irregular tax rebates, which has caused widespread shock in the secondary aluminum market. Currently, the market is still in a transitional observation phase, and after relevant policies are implemented, some downstream secondary aluminum producers in certain areas will face pressure due to rising tax costs. To offset these costs, companies may lower raw material procurement prices, which will increase the pressure on domestic aluminum scrap prices. However, from the supply side, the short-term aluminum scrap supply will remain tight, giving aluminum scrap suppliers a certain degree of pricing power. Overall, SMM believes that subsequent aluminum scrap prices will be under pressure, entering a stage of bargaining between sellers and buyers.

Secondary aluminum alloy: Yesterday, aluminum prices significantly rebounded, with SMM ADC12 prices following suit, increasing by 100 yuan/mt to 20,450 yuan/mt. The current continuous tightness in aluminum scrap supply, along with general price increases, has pushed up the cost of recycled aluminum alloys. Additionally, recent news of the cancellation of tax rebates in Anhui and Jiangxi has led to a strong sentiment among enterprises to raise prices to cope with the rising cost pressures. On the demand side, the traditional off-season atmosphere continues, and actual consumption remains weak. In the short term, ADC12 prices are expected to maintain a fluctuating upward trend, with cost support and policy disruptions making prices more likely to rise than fall. However, weak demand will limit the upside room. If the policy impact deepens or peak season demand is released as expected, prices may break through the current range; conversely, if policy implementation is mild and demand remains weak, prices may continue to consolidate at high levels. Subsequent focus should be on the implementation progress of policy documents, the recovery of aluminum scrap supply, and marginal improvements in end-use demand.

Summary: High aluminum prices have somewhat suppressed off-season consumption, but as the peak season approaches, expectations for order improvements strengthen. Weekly aluminum ingot inventory pressure decreased, with inventories slightly dropping to 596,000 mt. The SHFE aluminum backwardation structure strengthened slightly, supporting a rebound in aluminum prices above yuan 20,600/mt. Overall, short-term consumption shows only marginal improvement, and aluminum ingot inventories face renewed buildup pressure. However, current total inventory is not high, and some secondary aluminum enterprises in Anhui and Jiangxi provinces have received notices about the termination of tax refund policies, posing a risk of declining capacity utilization rates for scrap utilization enterprises, which provides some support for primary aluminum consumption. Future aluminum prices depend on the realization of peak consumption season. Next week, SHFE aluminum is expected to trade between yuan 20,500-20,800/mt, while LME aluminum is projected to range between $2,540-2,600/mt.

[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 as decision-making advice.]