June 25 SMM Morning Briefing
Futures:The most-traded SHFE aluminum 2608 contract closed at 22,970 yuan/mt, down 2.13%. Prices trade below the MA5 (23,630.00), MA10 (23,854.00), MA30 (24,256.83), and MA60 (24,549.33) moving averages, with short- and medium-term moving averages in bearish alignment and gradually pressing lower. The overall structure is significantly in the doldrums, with clear resistance from these moving averages above. The MACD DIF (-290.3158) is below DEA (-190.8865), the MACD histogram is at -198.8586, and bearish momentum continues to release, indicating persistent weakness. The suggested core trading range for SHFE aluminum is 22,900-23,600 yuan/mt. The LME aluminum 3M contract closed at $3,130/mt, up 0.48%. Prices trade below the MA5 (3,252.40), MA10 (3,339.70), MA30 (3,532.57), and MA60 (3,536.07) moving averages, with short- and medium-term moving averages in bearish alignment and gradually pressing lower. The overall structure is significantly in the doldrums, with clear resistance from these moving averages above. The MACD DIF (-101.9751) is below DEA (-57.5277), the MACD histogram is at -88.8948, and bearish momentum continues to release, indicating persistent weakness. The suggested core trading range for LME aluminum is $3,110-$3,250/mt.
Macro front:US President Trump posted on social media that Iran has informed the US that vessels transiting the Strait of Hormuz are currently subject to “no tolls, insurance fees, or any other charges.” The International Maritime Organization (IMO) released operational details for the Strait of Hormuz evacuation plan, stating that over 11,000 crew members stranded on vessels in the Gulf region will be evacuated in phases under a unified coordination mechanism. Foreign Minister Wang Yi held a phone call with Pakistani Deputy Prime Minister and Foreign Minister Dar at the latter's invitation. Dar briefed on the launch of a new phase of negotiations between Iran and the US. Wang Yi noted that the next phase should focus on three priorities. First, consolidate the comprehensive ceasefire and cessation of hostilities, and must not reignite war. Second, restore normal navigation in the Strait of Hormuz as soon as possible to ensure the stability of global production and supply chains. Third, support Middle Eastern countries to improve their mutual relations as soon as possible and explore a new regional security architecture.
Fundamentals:Outside China, the positive trend in US-Iran relations continued. The accelerated resumption of navigation in the Strait, combined with rising hawkish expectations for US Fed rate hikes, led to an accelerated erosion of geopolitical risk premiums. Against the backdrop of easing tensions in the Middle East and high aluminum prices, new overseas capacity was brought online ahead of schedule. However, due to the characteristics of aluminum production, it was difficult for previously suspended capacity in the Middle East to resume production quickly in the short term. In terms of domestic aluminum ingot inventories, domestic social inventory of aluminum ingots stood at 1.205 million mt this Thursday, destocking 37,000 mt from Monday, with the destocking trend continuing.
Primary Aluminum Market: In the morning session, the trading center of the SHFE aluminum 2606 contract fell below the same period's level of the previous trading day. As aluminum prices dropped, the release of stockpiling sentiment from prior price declines, combined with pervasive bearish market sentiment, led to overall weak purchase demand yesterday. Transaction prices extended declines, with mainstream trades at a discount of 30-50 yuan/mt against the SHFE aluminum July contract. In east China, the sell sentiment index stood at 2.98 yesterday, down 0.13 from the previous day; the purchase sentiment index was 2.83, down 0.24. Yesterday’s morning session pulled back sharply from the previous day, prompting traders in central China to raise their quotes. At low prices, suppliers showed low willingness to sell, held back from selling notably, and their intentions to hold prices firm were significant. Downstream processing enterprises exhibited strong fears of further price declines, a heavy wait-and-see atmosphere, and weakening buying sentiment. Ultimately, the actual transaction price range in central China was centered around a discount of 60-90 yuan/mt against the SHFE aluminum July contract. In central China, the sell sentiment index was 2.93 yesterday, down 0.02 from the previous day; the purchase sentiment index was 2.20, down 0.01.
Aluminum Scrap: Yesterday, the SMM A00 price plunged 330 yuan/mt from the previous trading day to 23,470 yuan/mt. The aluminum scrap market followed the decline broadly, but cost support was notable, limiting the extent of losses. Regarding price differences between A00 aluminum and aluminum scrap, on June 24, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,184 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap stood at 1,533 yuan/mt. Enterprise tax costs increased by more than 2% YoY. The continued narrowing of the price differences reflects strong bottom support for aluminum scrap. Supply side, regulatory oversight on the "reverse invoicing" policy continued to tighten. Cancellation of tax rebates and intensified tax audits in some provinces pushed up costs for VAT-invoiced raw materials. The price spread between Chinese and overseas markets remained inverted, and scarce low-priced, high-quality imported supplies further reduced supplementation to the domestic market. Demand side, the off-season effect deepened, with downstream scrap utilization enterprises operating at low rates. End-use orders were insufficient, and enterprises maintained purchasing as needed and low inventory strategies in a cautious buying atmosphere. The aluminum scrap market is expected to continue its pattern of weak fluctuations at elevated levels. The tight supply of compliant, VAT-invoiced cargoes persists, and coupled with expanding output cuts and halts, expectations of a contraction in aluminum scrap supply strengthen, providing bottom support for prices. Demand side, downstream secondary cast aluminum alloy orders remain sluggish, and purchasing support from wrought aluminum alloys has also weakened; end-use consumption is unlikely to see substantial improvement. The supply-demand weakness in the aluminum scrap market is unlikely to reverse in the near term.
Secondary Aluminum Alloy: Yesterday, ADC12 market quotes were mostly lower, with SMM ADC12 dropping 100 yuan/mt from the previous trading day to 24,000 yuan/mt. The recent continued weakness in SHFE aluminum and cast aluminum alloy futures prices has led to some loosening in aluminum scrap prices, and cost-side pressure eased slightly compared to earlier, opening room for price reductions. However, the issue of tax invoices in the aluminum scrap market has not seen significant improvement, making procurement of compliant raw materials relatively difficult and keeping enterprises' actual production costs at a relatively high level, which provides strong support for ADC12 prices. Downstream demand continues to show off-season characteristics, with procurement primarily driven by essential restocking, and transaction performance remains mediocre. In the short term, ADC12 prices will continue to fluctuate within a narrow range.
Aluminum Market Recap: The accelerated recovery of strait shipping, combined with hawkish expectations from the US Fed, has led to a continued rapid contraction of the geopolitical premium. In the short term, LME aluminum will be under pressure. In China, the destocking pace has been maintained, but absolute inventories remain at a high range, unchanged. Without new macro positive factors, SHFE aluminum is following LME aluminum under pressure. In the short term, aluminum prices are expected to remain in the doldrums.
[The information provided is for reference only. This article does not constitute direct investment research decision-making advice. Clients should make prudent decisions and not use it as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]
