Aluminum Prices Continue to Fluctuate at Highs, Downstream Purchasing Sentiment Shows Increasing Fear of High Prices [SMM Aluminum Morning Meeting Summary]

8.27 SMM Aluminum Morning Meeting Summary

Futures: In the night session, the most-traded SHFE aluminum 2510 contract opened at 20,730 yuan/mt, reached a highest price of 20,950 yuan/mt, a lowest price of 20,725 yuan/mt, and closed at 20,880 yuan/mt, with a trading volume of 11.3 lots and open interest of 272,000 lots. LME opened at 2,635 yuan/mt, reached a highest price of 2,637 yuan/mt, a lowest price of 2,633.5 yuan/mt, and closed at 2,636 yuan/mt.

Macro: (1) US President Trump stated that trade agreements between the US and the EU, Japan, and South Korea have been completed. (Neutral ★) (2) US President Trump indicated during a cabinet meeting that he might keep Stephen Milan on the Federal Reserve Board for a long term. Trump mentioned that he will soon have a majority on the Fed. Fortunately, Powell's term as Fed Chairman is coming to an end. Commerce Secretary Howard Rutnick and Treasury Secretary Scott Besent will be involved in selecting a successor for Fed Governor Lisa Cook. (Neutral ★)

Fundamentals: (1) According to SMM statistics, from 8.18-8.24, domestic aluminum ingot outflows from warehouses totaled 111,200 mt, down 1,300 mt MoM. (Bearish ★) (2) According to SMM statistics, from 8.18-8.24, domestic aluminum billet outflows from warehouses 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 consumption 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 mainly fluctuated, with the price center hovering around 20,750 yuan/mt. In east China, the market held a certain bearish sentiment towards future spot premiums, and suppliers were actively selling. Downstream purchasing sentiment was weak, and at the opening, the market quoted a discount of 10 yuan/mt to parity against the SMM average price. Purchase activity was moderate, and subsequently, the spot discount further weakened, with actual transactions for cargoes with invoices dated this month mainly ranging from a 10 yuan/mt to 20 yuan/mt discount against the SMM average price. Yesterday, the SMM A00 aluminum price was 20,780 yuan/mt, unchanged from the previous trading day, at parity with the 09 contract, and down 20 yuan/mt from the previous trading day. In central China, on the first trading day after the long-term contract ended, the absolute price of aluminum was high, and downstream purchases were sluggish, with transactions at a 20-30 yuan/mt discount against the SMM central China aluminum price. Yesterday, the central China market's selling sentiment index was 2.47, down 0.26 WoW; the purchasing sentiment index was 2.15, down 0.33 WoW. SMM central China A00 aluminum against SHFE 2509 contract recorded 20,620 yuan/mt, down 10 yuan/mt from the previous trading day, at a discount of 160 yuan/mt to the 09 contract, a decrease of 30 yuan/mt.

Recycled aluminum raw materials: Yesterday, the spot primary aluminum price remained unchanged from the previous trading day, with SMM A00 spot closing at 20,780 yuan/mt. The overall aluminum scrap market prices were stable. 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 scrap aluminum was concentrated at 15,550-16,050 yuan/mt (excluding tax), and shredded aluminum tense scrap (priced based on aluminum content) was concentrated at 17,300-17,800 yuan/mt (excluding tax). Shredded aluminum tense scrap (priced based on aluminum content) and wheel hubs (both automotive and motorcycle) rose 100 yuan/mt MoM. In Jiangxi and Hunan, all types of scrap aluminum prices increased by 100 yuan/mt yesterday. Regarding the price difference between A00 aluminum and aluminum scrap, in Foshan, the price difference for mixed aluminum extrusion scrap free of paint increased by 80 yuan/mt from last Friday, widening to 1,992 yuan/mt. In Shanghai, the price difference for mechanical casting aluminum scrap decreased by 11 yuan/mt from last Friday, narrowing slightly to 1,988 yuan/mt. It is expected that this week, the aluminum scrap market prices will continue to fluctuate at highs. The tight supply situation for shredded aluminum tense scrap (priced based on aluminum content) is expected to strengthen, with prices fluctuating 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, yesterday, the most-traded 2511 cast aluminum alloy futures contract opened at 20,320 yuan/mt, reached a high of 20,325 yuan/mt, and a low of 20,260 yuan/mt, finally closing at 20,265 yuan/mt, down 65 yuan/mt or 0.32% from the previous trading day. Open interest was 8,128 lots, and trading volume was 1,557 lots, with bulls mainly reducing their positions during the day. In the spot market, the SMM A00 aluminum price remained steady at 20,780 yuan/mt compared to the previous day, and the SMM ADC12 price stayed at 20,550 yuan/mt. Currently, the supply of scrap aluminum remains tight, providing strong cost support for secondary aluminum alloy prices. Additionally, recent news of canceled 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. On the demand side, as the traditional "September peak season" approaches, downstream purchasing sentiment is mildly rebounding, but the recovery strength is still insufficient. In the short term, ADC12 prices are expected to maintain a fluctuating upward trend, driven by cost support and policy disruptions, but the lack of demand may limit the upside room. If the policy impact deepens or if 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. Subsequently, close attention should be paid to the progress of policy document implementation, the recovery of scrap aluminum supply, and the marginal improvement in end-use demand.

Summary: From a macro perspective, Trump announced trade agreements with multiple countries, though the specifics remain unknown. This move may intensify competition in aluminum semis exports, creating bearish pressure on long-term aluminum prices. Domestically, the National Development and Reform Commission (NDRC) emphasized expanding domestic demand and ensuring fair competition, indicating clear policy support intentions, but translating this into actual consumption will take time. Demand remains the core focus for the market going forward. Some companies have begun stockpiling in anticipation of improved orders during the upcoming peak season. Domestic downstream aluminum operating rates saw a slight rebound. However, as aluminum prices rebounded, end-user shipments declined again, and spot procurement volumes by processing companies decreased significantly. Inventory-wise, social inventory of aluminum ingots in major consumption areas recorded 463,500 mt on Tuesday, with an inventory buildup of 4,500 mt compared to Monday. Traditional off-season demand remains weak, aluminum ingot inventories continue to build, suppliers are pessimistic about future premiums and discounts, and are actively shipping goods. With A00 aluminum prices fluctuating at highs, downstream procurement sentiment is weak, and spot premiums are under pressure. Overall, consumption is only marginally improving in the short term, and aluminum ingot inventories may build up again. However, current total inventory remains low compared to historical levels for the same period. With macro tailwinds dominating, aluminum prices are expected to gain more support. This week, aluminum prices are likely to continue fluctuating at highs, and further increases will depend on the realization of 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 exercise caution and not use this to replace independent judgment. Any decisions made by clients are unrelated to SMM.]