SMM Aluminum Morning Meeting Summary
Futures: The most-traded SHFE aluminum 2608 contract settled at 23,075 yuan/mt, up 75 yuan from yesterday’s settlement price, a rise of 0.33%. It opened at 23,040 yuan/mt and traded in a range of 23,025-23,160 yuan/mt. The price traded above the MA5 (23,042.00) and MA10 (22,864.50) but below the MA30 (23,543.17) and MA60 (24,138.33) moving averages. The short- and medium-term moving averages formed a bearish alignment and gradually exerted downward pressure, highlighting a pronounced structure of consolidating on a subdued note. The multiple moving averages overhead acted as layers of resistance. The MACD indicator showed DIF (-303.1975) above DEA (-364.8229), and the MACD histogram was 123.2509, suggesting that bearish momentum had eased. The advised core trading range for SHFE aluminum is 22,600-23,400 yuan/mt. The LME aluminum 3M contract settled at $3,158.00/mt, up 0.02%. The price traded below the MA5 (3,161.70), MA10 (3,135.05), MA30 (3,311.17), and MA60 (3,452.88) moving averages. The short- and medium-term moving averages formed a bearish alignment and gradually exerted downward pressure, with a notable structure of consolidating on a subdued note. The moving averages overhead exerted clear resistance. The MACD indicator showed DIF (-85.0133) above DEA (-99.7896), and the MACD histogram was 29.5525, as bearish momentum eased and the downward momentum slowed down. The advised core trading range for LME aluminum is $3,100-3,200/mt.
Macro front: US President Trump posted on social media that the US would reimpose a "blockade against Iran," targeting only Iranian vessels or clients by restricting their access to the Strait of Hormuz. All other countries would be allowed fair and open use of the strait. Trump also said that the US would charge a 20% fee on all goods shipped through the strait, with implementation and deployment to begin immediately. President Trump stated that strikes against Iran would continue. He officially notified Congress that the Iran conflict had flared up again. The US military announced that it would begin a maritime blockade against Iran at 16:00 Eastern Time on July 14. Iran responded that it would never allow US interference in the management of the Strait of Hormuz and warned that if the conflict expanded in the region, all countries in the area would be engulfed in the flames of war. Federal Reserve Governor Waller remarked that if this week’s core inflation data came in high again, the Fed would need to consider a near-term rate hike.
Fundamentals: In markets outside China, geopolitical tensions fluctuated, and the unresolved Strait of Hormuz issue pushed up geopolitical premiums. Production resumptions and new capacity releases continued in the ex-China aluminum sector, gradually materializing supply growth in the global aluminum market. Market expectations for a transition from a tight to a surplus market in the long term continued to heat up, significantly capping the upside room for spot aluminum premiums outside China and putting medium and long-term pressure on LME aluminum prices. Meanwhile, expectations for US Fed interest rate hikes persisted, continuing to cap the upside of aluminum prices. In the Chinese market, inventory side, domestic aluminum ingot inventory kept destocking. On the inventory front, domestic mainstream consumption-area aluminum ingot inventory stood at 1.078 million mt yesterday, destocking by 20,000 mt WoW from last Thursday and by 52,000 mt WoW from last Monday.
Primary aluminum market: In morning trading, the SHFE aluminum 2606 contract’s trading center ran lower than the same period of the previous trading day. Dragged by falling aluminum prices, today's market buying sentiment picked up MoM. Market transactions were done at parity to a premium of 10 yuan/mt against the SHFE aluminum 07 contract, with quotes against the SHFE aluminum 08 contract around a discount of 20 yuan/mt to parity. Today, the east China selling sentiment index came in at 3.08, up 0.04 MoM; the buying sentiment index was 3.16, up 0.06 MoM.
Today, the transaction atmosphere in the central China market stayed high. Trading firms engaging in both spot and futures market tended to make heavy purchases at low discounts, boosted by which, market quotes gradually edged up. However, downstream processing enterprises, constrained by insufficient end-user orders, saw persistently subdued buying sentiment, diverging widely from the buying prices offered by traders. Eventually, the actual transaction price range in the central China market centered around a discount of 100-130 yuan/mt against the SHFE aluminum 08 contract. Today, the central China selling sentiment index came in at 2.83, down 0.01 MoM; the buying sentiment index came in at 2.21, up 0.04 MoM.
Secondary aluminum materials: Today, SMM A00 spot aluminum prices closed at 23,000 yuan/mt, down 120 yuan/mt MoM from the previous trading day. The aluminum scrap market largely followed the decline, with some regions and varieties holding steady on a wait-and-see stance. Supply-side constraints continued to intensify, with the impact of the reverse invoicing policy deepening further. News emerged from Shandong that the reverse invoicing would be suspended starting July, and small- and medium-sized scrap utilization enterprises in Anhui, Jiangxi, Hubei, and other regions saw spreading production cuts and stoppages. Compliant, invoiced aluminum scrap became increasingly scarce. On the import side, the earlier inverted price spread between Chinese and overseas markets led to a scarcity of high-quality overseas cargo, and due to a 1-3 month shipping lag, port arrivals were set to remain low, June-August. Meanwhile, the UAE’s implementation of an aluminum scrap export ban and the EU’s tariff hike policy further tightened overseas aluminum scrap supply.
This week, the aluminum scrap market is expected to continue its sideways pattern, capped by demand and underpinned by costs. The mainstream trading range for shredded aluminum tense scrap (priced based on aluminum content) is likely to center around 19,900-20,500 yuan/mt. The pullback in spot primary aluminum prices limited the further narrowing of the price difference between A00 aluminum and aluminum scrap. The economic advantage of aluminum scrap over primary aluminum is unlikely to disappear in the short term, and demand-side support for aluminum scrap prices remained in place. Should aluminum prices continue to trend lower subsequently, the substitution effect of primary aluminum for aluminum scrap will accelerate and become more evident.
Secondary aluminum alloy: In the spot market, ADC12 market quotes overall consolidated on a subdued note today, with SMM ADC12 prices sliding by 100 yuan/mt MoM from the previous trading day. The pullback in aluminum prices and the weakening of cast aluminum alloy futures weighed on market sentiment, with enterprises’ price centers moving lower in tandem with the cost side. Meanwhile, downstream demand continued to weaken, and sluggish trading sentiment further eroded enterprises’ willingness to hold prices firm. Overall, against a backdrop of weakening cost support and increasingly evident off-season demand characteristics, the ADC12 market will mainly move sideways on a weak note in the short term.
Overall Outlook: Overall, the recent escalation of geopolitical conflicts in the Middle East has expanded risk premiums, coupled with continued destocking of domestic aluminum ingots, supporting aluminum prices to hold up well. However, the continued commissioning of aluminum capacity outside China and the US’s pursuit of a strong dollar policy will continue to cap the upside room for aluminum prices, putting notable pressure on the upside. In summary, aluminum prices are expected to continue consolidating on a strong note while encountering resistance in the short term.
[The information provided is for reference only. This article does not constitute direct investment research decision-making advice. Clients should make decisions prudently and not substitute this for their independent judgment. Any decisions made by clients are not related to SMM.]
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