Domestic Macro Tailwinds Support Strong Short-Term Aluminum Prices [SMM Aluminum Morning Meeting Summary]

8.26 SMM Aluminum Morning Meeting Summary

Futures: In the night session, the most-traded SHFE aluminum 2510 contract opened at 20,750 yuan/mt, reached a highest price of 20,775 yuan/mt, a lowest price of 20,680 yuan/mt, and closed at 20,740 yuan/mt, with a trading volume of 3.3 lots and an open interest of 248,000 lots. LME was closed yesterday.

Macro: (1) The Trump administration outlined in a draft notice released on Monday plans to impose a 50% tariff on Indian products, signaling the White House's latest move to advance higher tariffs. A notice from the US Department of Homeland Security stated that the increased tariffs will target Indian products "entering the consumer market or withdrawn from warehouses for consumption after 12:01 am Eastern Daylight Time on August 27, 2025." (Bearish ★) (2) Zheng Shanjie, head of the National Development and Reform Commission (NDRC), hosted a corporate symposium to gather opinions and suggestions on expanding domestic demand and stabilizing employment for the scientific formulation of the 15th Five-Year Plan. Zheng Shanjie indicated that the NDRC will continuously improve policies and measures to expand domestic demand and actively foster a fair competitive market environment. (Bullish ★)

Fundamentals: (1) According to SMM statistics, during 8.18-8.24, outflows from warehouses of aluminum ingots in China totaled 111,200 mt, down 1,300 mt MoM. (Bearish ★) (2) According to SMM statistics, during 8.18-8.24, outflows from warehouses of aluminum billet in China totaled 48,000 mt, down 1,000 mt MoM. (Bearish ★) (3) According to SMM statistics, on August 25, the inventory of primary aluminum in major domestic consumer areas was 616,000 mt, up 20,000 mt from last Thursday and up 9,000 mt from last Monday. (Bearish ★)

Primary Aluminum Market: In the morning session yesterday, the front-month SHFE aluminum contract fluctuated, with the center not showing significant changes, hovering around 20,760 yuan/mt, but the absolute price rose compared to the previous trading day's morning session. In east China, suppliers were mainly selling, while downstream purchasing sentiment was moderate, with transactions closing at a discount of 10 yuan/mt to parity against the SMM average price. Yesterday, the east China market's selling sentiment index was 3.18, down 0.18 WoW; the buying sentiment index was 3.11, down 0.24 WoW. Yesterday, SMM A00 aluminum was quoted at 20,780 yuan/mt, up 70 yuan/mt from the previous trading day, at a premium of 20 yuan/mt against the 09 contract, down 10 yuan/mt from the previous trading day. In the central China market, month-end price collapse continued, coupled with rising futures prices, leading to weak downstream purchases, with transactions closing at a discount of 20-30 yuan/mt against the SMM central China aluminum price. Yesterday, the central China market's selling sentiment index was 2.73, up 0.06 WoW; the buying sentiment index was 2.48, down 0.11 WoW. SMM central China A00 aluminum against the SHFE 2509 contract was recorded at 20,630 yuan/mt, up 50 yuan/mt from the previous trading day, at a discount of 130 yuan/mt against the front-month, down 30 yuan/mt.

Recycled Aluminum Raw Materials: The spot aluminum price increased by 70 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,780 yuan/mt. The overall market price of aluminum scrap followed the upward trend. In the current traditional off-season, downstream scrap utilization enterprises have weak order releases, and procurement is mainly based on rigid demand. Yesterday, the concentrated quotation for baled UBC was 15,550-16,050 yuan/mt (excluding tax), and the concentrated quotation for shredded aluminum tense scrap (priced based on aluminum content) was 17,200-17,700 yuan/mt (excluding tax). Baled UBC prices were up 50 yuan/mt MoM, while shredded aluminum tense scrap (priced based on aluminum content) and wheel hubs (both automotive and motorcycle) remained unchanged MoM. It is expected that the aluminum scrap market will continue to fluctuate at highs this week. The tight supply situation for shredded aluminum tense scrap (priced based on aluminum content) is intensifying, with prices expected to fluctuate in the range of 17,100-17,600 yuan/mt (excluding tax). Baled UBC, supported by downstream can stock and other scrap utilization enterprises, 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 its lowest point of 20,170 yuan/mt, reached a high of 20,340 yuan/mt, and closed at 20,330 yuan/mt, an increase of 155 yuan/mt or 0.77% from the previous trading day. Open interest was 8,185 lots, and trading volume was 2,355 lots, with bulls adding positions during the day. In the spot market, the SMM A00 aluminum price rose 70 yuan/mt to 20,780 yuan/mt, and the SMM ADC12 price increased by 100 yuan/mt to 20,550 yuan/mt. The continuous tight supply of aluminum scrap provides strong cost support for secondary aluminum alloy prices. Additionally, recent news of the cancellation of tax rebates and additional taxes has led to a high sentiment for price increases among enterprises to cope with rising costs, making prices more likely to rise than fall in the short term. Demand side, as the traditional "September peak season" approaches, downstream procurement sentiment is mildly rebounding, but the recovery strength remains insufficient. In the short term, the ADC12 price is expected to maintain a fluctuating upward trend, driven by cost support and policy disruptions, but the lack of demand may limit upside room. If the policy impact deepens or if peak season demand meets expectations, prices may break through the current range; conversely, if policy implementation is mild and demand remains weak, prices may continue to consolidate at highs. Subsequent attention should be paid to the progress of policy document implementation, the recovery of aluminum scrap supply, and the marginal improvement in end-use demand.

Summary: From a macro perspective, the US plans to impose a 50% tariff on Indian products, escalating global trade tensions and potentially suppressing overseas demand expectations. Domestically, the NDRC emphasizes expanding domestic demand and fair competition, with clear intentions to provide a policy floor, but it will take time for these measures to translate into actual consumption. The demand side remains the core focus of the market, with some enterprises already starting to stockpile inventory in anticipation of better orders during the upcoming peak season. The operating rate of downstream aluminum industries in China has slightly rebounded, but with the rebound in aluminum prices, terminal shipments have declined again, and the spot procurement volume of processing material enterprises has significantly decreased. Inventory side, national social inventory of aluminum ingots recorded 616,000 mt on Monday, with an inventory buildup of 20,000 mt WoW; total outflows from warehouses last week were 111,200 mt, down 1,300 mt WoW. Concentrated arrivals over the weekend pushed the social inventory of aluminum ingots back above 600,000 mt. Coupled with the rebound in aluminum prices, procurement sentiment weakened, putting some pressure on spot premiums. Overall, consumption is only marginally improving in the short term, and aluminum ingot inventory may see further buildup. However, the current total inventory remains low compared to the same period in history. With macro tailwinds dominating, aluminum prices are expected to gain more support. This week, aluminum prices are likely to continue fluctuating at highs; further upward movement will require the realization of the peak aluminum consumption season.

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