7.7 SMM Morning Meeting Summary
Futures: The most-traded SHFE aluminum contract opened at 22,850 yuan/mt in the night session on July 6, reached a highest price of 22,950 yuan/mt, a lowest price of 22,790 yuan/mt, and finally closed at 22,900 yuan/mt, up 0.07% from the previous close. During this period, the price rebounded from the recent low of 22,250, repairing with a small bullish candlestick, and stood above MA5 (22,823.05), but still traded below all the medium and long-term moving averages, including MA10 (22,769.40), MA20 (22,932.81), MA40 (23,321.76), and MA60 (23,593.64). All medium and long-term moving averages maintained a bearish downward arrangement. The previous low of 22,250 provided solid support. Short-term downward momentum continued to slow down. Trading volume during this period was 42,900 lots, significantly shrinking from the previous, and open interest stood at 250,000 lots, down 3,475 lots from the previous. The futures displayed a feature of bearish position reduction. Technically, on the 4-hour MACD indicator, the DIFF (-281.88) was above the DEA (-348.76), with the golden cross structure persisting. The red histogram STICK value was 133.76, with bullish momentum continuing to expand. However, the overall medium and long-term bearish pattern had not changed yet. On July 6, LME aluminum opened at $3,094.0/mt, reached a highest price of $3,124.5/mt, a lowest price of $3,094.0/mt, and finally closed at $3,113.0/mt, up 0.74% from the previous close. During this trading day, the price staged a mild rebound from the recent low of 3,040, repairing with a bullish candlestick, and stood above MA5 (3,105.200), but still traded below all the medium and long-term moving averages, including MA10 (3,148.19), MA20 (3,254.69), MA40 (3,364.76), and MA60 (3,391.32). All moving averages across different periods overall maintained a bearish downward arrangement. The previous low of 3,040.0 provided solid support. Short-term downward momentum continued to slow down. Trading volume for the day was 15,144 lots, shrinking by 5,821 lots from the previous, and open interest was 600,000 lots, down 936 lots from the previous. The market displayed a feature of bearish position reduction. Technically, on the daily MACD indicator, the DIFF (-125.43) was below the DEA (-109.32), maintaining a death cross structure. The green histogram STICK value was -32.21, with bearish momentum further contracting from the prior period, but the bear-dominated pattern remained unchanged.
Macro Front: On Monday, the US Institute for Supply Management (ISM) reported that the ISM Services PMI for June fell to 54.0 from 54.5 in May, slightly below market expectations of 54.2, remaining above the 50 mark continuously, signaling that the services sector remained in expansion territory but the pace of expansion slowed down. Fed Governor Waller stated that the US labour market had stabilized while inflation was reaccelerating, and that current inflation risks now exceeded employment risks, a complete reversal compared to policy considerations a year ago. He noted that last year, in response to a weak labor market, interest rate cuts were supported, and now the policy focus should shift back to containing inflation. According to the CME "FedWatch Tool": the probability of the US Fed keeping interest rates unchanged in July is 74.3%, while the probability of a cumulative 25-basis-point rate hike is 25.7%. The probability of the Fed keeping rates unchanged through September is 42.9%, with a 46.2% chance of a cumulative 25-bp hike and a 10.8% chance of a cumulative 50-bp hike.
Fundamentals:According to an SMM roundup, total planned aluminum capacity outside China for 2026 and beyond reached 20.72 million mt. Of this, around 2.3 million mt of aluminum capacity outside China is scheduled to come onstream in 2026, with approximately 700,000 mt already commissioned and the remaining 1.6 million mt expected to be brought online in H2 2026. In 2027, 3.555 million mt of new capacity is planned to be commissioned, of which Indonesia accounts for around 67.5%. Cumulative planned new capacity from 2026 to 2027 totals about 5.855 million mt, representing 28.3% of the total planned capacity for 2026 and beyond. On the inventory front, aluminum ingot inventory in major consuming regions fell by 0.85 WoW on Monday, with destocking mainly taking place in Guangdong and Wuxi.
Primary Aluminum Market:Early in the trading session, the trading center of the SHFE aluminum 2606 contract was higher than the same period the previous trading day. Driven by higher aluminum prices, market selling sentiment strengthened somewhat WoW yesterday, while buying sentiment remained relatively weak, with limited price acceptance among some downstream players. Spot supply was ample, and mainstream transactions were done at parity to a premium of 10 yuan/mt against the SHFE aluminum 07 contract. In east China yesterday, the selling sentiment index stood at 3.00, up 0.08 WoW, while the buying sentiment index was 2.79, flat WoW. Futures aluminum rebounded, and with the day being Monday, spot market activity in central China was subdued. Weak end-use demand coupled with strong bearish sentiment among downstream processing enterprises led to a weakening in purchase sentiment, while suppliers showed little willingness to hold prices firm. Eventually, actual transaction prices in central China ranged from a discount of 60 to 80 yuan/mt against the SHFE aluminum 07 contract, with a continued downward trend. In central China yesterday, the selling sentiment index was 2.90, up 0.01 WoW, and the buying sentiment index was 2.11, down 0.01 WoW.
Aluminum Scrap:Yesterday, SMM A00 spot aluminum closed at 22,840 yuan/mt, up 80 yuan/mt from the previous trading day, while prices in the aluminum scrap market diverged significantly. Regarding price differences between A00 aluminum and aluminum scrap, as of July 6, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan stood at 1,976 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 662 yuan/mt. Notably, under the dual impact of rapidly declining aluminum prices and tight invoice supply, the price differences for aluminum tense scrap narrowed sharply. Some cast aluminum alloy enterprises have already begun using A00 aluminum ingots to replace aluminum scrap as raw material for production. Import side, apart from port arrivals running at low levels during June-August due to a 1-3 month shipping lag factor, expectations of tightening high-quality scrap supply overseas have significantly strengthened, as the UAE imposed a temporary 4-month ban on aluminum scrap exports starting June and the EU plans to levy a 15% tariff from September onward; the import supply chain will suffer substantial damage. The aluminum scrap market is expected to continue consolidating on a subdued note, but downside room for prices is limited, with the mainstream range of shredded aluminum tense scrap priced based on aluminum content seen at 19,200-19,800 yuan/mt (excluding tax). Supply side, the reverse invoicing policy constraint is hard to reverse in the short term, and the tight availability of compliant invoiced cargo will persist; import side, the lagged suppressing effect of multiple bearish factors on actual port arrivals will gradually emerge in the coming months, further weakening the supplementation from imported aluminum scrap. Demand side, as the off-season deepens, downstream operating rates remain low, and end-use orders are unlikely to see meaningful improvement; scrap utilization enterprises are likely to continue purchasing as needed and maintaining low inventory strategies. The price difference between A00 aluminum and aluminum scrap has narrowed to historical lows, significantly eroding the cost advantage of aluminum scrap over primary aluminum; if aluminum prices decline further, the substitution effect will accelerate.
Secondary aluminum alloy: Spot: Yesterday, the SMM ADC12 price remained stable at 24,000 yuan/mt from the previous trading day. Driven by continued rebounds in spot aluminum prices and aluminum alloy futures, some enterprises raised their quotes by 50-100 yuan/mt, strengthening cost support. However, downstream demand still showed no obvious improvement, and transactions remained sluggish, prompting some enterprises to hold prices steady and watch. Amid high costs and weak demand, the market mostly adjusts prices cautiously; ADC12 prices are expected to continue consolidating sideways in the short term, and further upside awaits support from end-use demand.
Aluminum Market Summary: Macro front, US June nonfarm payrolls came in significantly below expectations, pushing back market expectations for a Fed rate hike; a weaker US dollar provided valuation support for nonferrous metals. The US and Iran restarted nuclear talks, and geopolitical safe-haven premiums continued to narrow, to some extent capping commodity upside; meanwhile, expectations of new aluminum capacity commissioning outside China present a medium- and long-term bearish supply factor. Domestically, positives stood out, with the proportion of liquid aluminum continuing to rise; aluminum ingot warehouse withdrawals hit a four-year high in the past week, and the pace of destocking accelerated significantly, providing support for the bottom of SHFE aluminum. Amid bullish and bearish factors, overseas, the US dollar bullish factor and supply/geopolitical bearish factors offset each other; after earlier overshooting, LME aluminum's downward momentum has slowed, and in the short term, it mainly consolidates at lows to repair. Domestically, supported by rapid destocking, the probability of SHFE aluminum performing weaker than LME aluminum is low; SHFE and LME may diverge slightly, and a one-sided weak trend is unlikely to persist.
[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 rely on this as a substitute for independent judgment. Any decisions made by clients are not related to SMM.]
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