6.26 SMM Morning Call Notes
Futures: The most-traded SHFE aluminum 2608 contract closed at 22,935 yuan/mt, down 40 yuan or 0.17% from the previous settlement price. It opened at 22,950 yuan/mt and fluctuated between 22,810 and 23,030 yuan/mt. The price is trading below the MA5 (23,389.00), MA10 (23,726.50), MA30 (24,192.17), and MA60 (24,529.08) moving averages. The short- and medium-term moving averages are in a bearish alignment and gradually pressing lower, highlighting a structure notably in the doldrums, with the various timeframe moving averages above forming layers of resistance. The MACD indicator's DIF (-345.5331) is below the DEA (-223.1560), and the MACD green bar reading is -244.7541, indicating bearish momentum continues to be released. The recommended trading range for SHFE aluminum is 22,500-23,300 yuan/mt. The LME aluminum 3M contract closed at $3,174.5/mt, down 0.35%. The price is trading below the MA5 (3,218.90), MA10 (3,308.40), MA30 (3,518.28), and MA60 (3,532.48) moving averages, with short- and medium-term moving averages in a bearish alignment and gradually pressing lower, and the overall structure notably in the doldrums, with moving averages above providing notable resistance. The MACD indicator's DIF (-104.5279) is below the DEA (-66.2193), with the MACD green bar at -76.6172, as bearish momentum continues to be released, signaling persistent weakness. The recommended trading range for LME aluminum is $3,100-3,200/mt.
Macro Front: Omani Foreign Minister Badr stated that future arrangements concerning the Strait of Hormuz will not involve any transit fees. Meanwhile, Iran estimates that if services such as security and environmental fees are charged for the Strait of Hormuz, it would generate $40 billion in annual revenue for the relevant countries. The Islamic Revolutionary Guard Corps Navy stated that vessels transiting the Strait of Hormuz must coordinate in advance, and violators "will be dealt with." S&P Global Energy reported that the daily average Strait of Hormuz transits in June had recovered to about 57% of pre-conflict levels. New York Fed President John Williams said interest rates are in a good place to bring inflation back to the central bank's target. Williams expects inflation to slow to 3.5% by year-end, then continue along a "smooth path" toward 2%, reaching the target in 2028.
Fundamentals: Supply side, according to SMM data, China's aluminum production rebounded WoW this week, mainly driven by the production ramp-up of newly commissioned capacity and the resumption of idle capacity. The proportion of liquid aluminum rose 0.2 percentage points WoW, while casting ingot output further declined. Overseas, earlier high prices spurred accelerated commissioning of new projects. As new projects are energized and ramp up production, operating aluminum capacity outside China is expected to increase further WoW. On the inventory front, aluminum destocking continued smoothly this week. As of Thursday, China's social inventory of aluminum ingot had fallen 50,000 mt WoW and 37,000 mt from Monday. Weakening aluminum prices lifted downstream buying sentiment, helping to drive the destocking. On the export side, the SHFE/LME price ratio recovered sharply this week, rebounding to 7.29 as of June 25, up 12.2% from the prior low of 6.5. Import losses narrowed to around 3,400 yuan/mt, nearly 45% narrower than the previous peak loss of 7,604 yuan/mt. As a result, the profit margin that had spurred substantial aluminum semis exports contracted rapidly, and new orders in some segments have declined. As orders on hand are gradually fulfilled, exports of aluminum semis face downside risks if export margins fail to recover.
Primary aluminum market: In early trading, the center of SHFE aluminum 2606 contract prices was well below the same period in the prior trading day. As prices fell to the recent low, overall buying sentiment improved MoM from yesterday, lifting transaction prices. Mainstream transactions were at a discount of 20-40 yuan/mt against the SHFE aluminum 07 contract. In east China, the willingness-to-sell sentiment index stood at 2.90, down 0.08 WoW; the purchasing sentiment index stood at 3.16, up 0.34 WoW. SHFE aluminum continued to tumble. In central China, suppliers showed low willingness to sell, and traders tended to offer substantial volumes of spot warrants with limited intention to hold prices firm. Downstream processing enterprises displayed weak buying sentiment, making only limited just-in-time procurement, mainly of warrants, with few spot transactions. The central China market eventually saw transaction prices centered around a discount of 20-50 yuan/mt against the SHFE aluminum 07 contract. The willingness-to-sell sentiment index in central China was 2.89, down 0.04 WoW; the purchasing sentiment index was 2.14, down 0.06 WoW.
Aluminum scrap: SMM A00 spot aluminum closed at 22,850 yuan/mt yesterday, plunging 620 yuan/mt MoM from the prior trading day. Aluminum scrap moved lower in sympathy but limited losses due to significant cost support. On the price difference front, on June 25, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 2,137 yuan/mt, while that between A00 aluminum and shredded aluminum tense scrap stood at 1,160 yuan/mt. Both narrowed over the week amid sustained resistance from aluminum scrap prices and a rising tax burden on enterprises, with tense scrap declining less than wrought aluminum scrap. Supply remained tight, and scrutiny of reverse-invoicing policies intensified. Production cuts and halts spread among medium- and small-sized scrap utilization enterprises in Anhui, Jiangxi, and Hubei, increasing the scarcity of compliant, invoiced aluminum scrap. On the import side, China's aluminum scrap imports totaled 152,000 mt in May, down 10.88% MoM and 4.81% YoY. Given the 1-3 month shipping lag, port arrivals from June to August are expected to remain low. In addition, the UAE imposed a four-month temporary ban on aluminum scrap exports starting from June 3, further intensifying the expectation of tightening supply of high-quality scrap in the Asian region. The demand side shows clear off-season characteristics, with enterprises having maintained strategies of purchasing as needed and keeping low inventory. The aluminum scrap market is expected to remain in the doldrums at high levels next week, but with limited downside room; the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) is expected to run at 19,300—19,900 yuan/mt (tax-excluded). The reverse invoicing policy constraints and the lagged contraction in aluminum scrap imports continue to provide bottom support, but weak off-season demand and low downstream operating rates are capping the upside room. Future attention should be paid to the pace of policy compliance, progress in US-Iran peace talks and the Strait of Hormuz shipping, the arrival pace of aluminum scrap from outside China, and changes in downstream operating rates within China.
Secondary Aluminum Alloy: Yesterday, mainstream ADC12 enterprise quotes were generally reduced by 100—200 yuan/mt, with the SMM ADC12 price dropping by 150 yuan/mt from the previous day to 23,850 yuan/mt. Under the continuous price decline, downstream client purchasing enthusiasm did not significantly improve; downstream purchases remained primarily just-in-time procurement, with strong wait-and-see sentiment and insufficient restocking willingness. Meanwhile, aluminum scrap prices were relatively firm, especially as compliant raw material supply remained tight; the price decline further squeezed aluminum scrap supplier profits, leading to increased reluctance to sell and affecting raw material circulation to some extent. Under the ongoing constraints of the "reverse invoicing" policy, industry compliance cost pressure has not yet been alleviated, and enterprises still face significant production and operational pressure. In the short term, the market will still be dominated by cautious wait-and-see and just-in-time procurement, with future attention needed on the aluminum price trend, changes in aluminum scrap supply, and downstream order recovery.
Aluminum Market Summary: The US Fed's hawkish pivot boosted the US dollar index, weighing on non-ferrous metal prices. Geopolitical tensions in the Middle East showed some volatility but with no signs of deterioration. Under macro headwinds, aluminum prices fell in and outside China. In the short term, bearish factors are dominant, and aluminum prices are expected to remain in the doldrums. Continuous monitoring is needed on Middle East production resumption news, overseas aluminum ingot inventory trends, and macro news fluctuations.
[The information provided is for reference only. This article does not constitute direct investment, research, or decision-making advice. Clients should make prudent decisions and not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]
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