7.2 SMM Aluminum Morning Meeting Minutes
Futures: SHFE aluminum closed at 23,280 yuan/mt, edging up 0.22%, with an intraday range of 23,145-23,295. The price was slightly above MA5 (23,250) and MA10 (23,150.5), but far below MA30 (23,409) and MA60 (24,028). Short-term moving-average support was limited, while mid-term moving averages still showed bearish pressure. MACD: DIF = -181.82, DEA = -272.64; the negative histogram flipped sharply to positive at 181.64 (previously negative), forming a golden cross at low levels, indicating a marked exhaustion of bearish momentum and that bulls were starting to gain strength. Trading volume shrank to 59,200 lots, and the rebound lacked volume support. The suggested core operating range for SHFE aluminum is 23,100-23,600. LME aluminum closed at $3,170.5/mt, edging up 0.13%, with an intraday range of 3,154.5-3,173. The price was slightly above MA5 (3,166.8) and MA10 (3,162.35), but far below MA30 (3,247.72) and MA60 (3,425.84). Short-term moving averages provided support, but mid-term bearish pressure was evident. MACD: DIF = -62.39, DEA = -81.55; the negative histogram turned positive to 38.31 (previously negative), forming a golden cross, with bearish momentum weakening. The suggested core operating range for LME aluminum is 3,150-3,200.
Macro front: The US-Iran conflict continued to escalate. On July 17, the US military continued airstrikes against Iran. Iran launched large-scale strikes on US military targets in Kuwait and Syria, and also attacked related facilities of US forces stationed in Bahrain. Iran warned that if the US continued attacking Iranian targets, Iran would expand the scope of strikes and target US industrial, technology, and AI-related assets in the Middle East.
Fundamentals: Supply side, last week the proportion of liquid aluminum in China’s aluminum rose 0.37 percentage points MoM, mainly because aluminum billet processing fees performed well, lifting the share of direct supply of liquid aluminum, while aluminum ingot casting output further contracted; outside China, amid continued progress in ramp up production at newly commissioned projects and resume production at restarted projects, aluminum supply was expected to keep increasing. Overall, however, the short-term global destocking trend for aluminum ingot was expected to be difficult to reverse. Demand side, downstream processing sectors were in the traditional consumption off-season, with mixed performance across segments but mainly under pressure; the operating rate of leading downstream aluminum processing enterprises was 61.3%, down 0.6 percentage points MoM. As the SHFE/LME price ratio repaired, downstream export profits narrowed; as orders on hand were digested, exports were expected to provide weaker support to demand. Inventory side, this week China’s aluminum social inventory continued the destocking trend. As of this Thursday, China’s aluminum ingot social inventory fell 2,000 mt from last Thursday to 1.022 million mt, and fell 25,000 mt from this Monday.
Primary Aluminum Market: In early trading, the center of SHFE aluminum 2606 contract trading was higher than the same period of the previous trading day. Affected by the off-season, market purchasing sentiment remained weak, but overall purchasing sentiment rose WoW from yesterday, and circulating cargo in the market was still relatively ample. Market transactions were at parity to a discount of 20 yuan/mt against the SHFE aluminum 08 contract. In the east China market, the shipments sentiment index was 3.11, flat WoW; the purchasing sentiment index was 2.9, up 0.01 WoW. In the central China market, trading sentiment continued to rebound WoW from the previous two days. As it was Friday, stockpiling demand from downstream processing enterprises was released, and stockpiling sentiment among trading firms engaging in both spot and futures market remained strong, providing solid support to market prices. In addition, suppliers showed a clear willingness to hold prices firm and hold back from selling. Ultimately, the actual transaction price range in central China was around a discount of 110-140 yuan/mt against the SHFE aluminum 08 contract, with a continued upward trend. In the central China market, the shipments sentiment index was 2.99, up 0.05 WoW; the purchasing sentiment index was 3.03, up 0.12 WoW.
Secondary Aluminum Scrap: Today, SMM A00 spot aluminum closed at 23,220 yuan/mt, up 50 yuan/mt from the previous trading day, while aluminum scrap prices were generally stable and on par. In terms of the price difference between A00 aluminum and aluminum scrap, on July 17, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,042 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 728 yuan/mt, still at an extremely low level. Supply-side constraints continued to intensify, and the impact of the reverse invoicing policy further deepened, with the scarcity of compliant invoiced aluminum scrap continuing to rise. On the import side, China’s imported aluminum scrap prices edged down this week: the imported shredded aluminum zorba price at Ningbo port was lowered from 21,920 yuan/mt to 21,820 yuan/mt (tax included), and at Tianjin port it fell from 21,970 yuan/mt to 21,770 yuan/mt (tax included). As overseas aluminum scrap offers continued to pull back, orders for aluminum scrap imported into Guangdong from Southeast Asia increased compared with earlier, and the import window improved further versus the previous period. However, new deals were still mainly concentrated in some low-priced resources and long-term cooperative clients, and spot market trading activity remained relatively limited. Aluminum scrap prices were expected to maintain a high-level sideways pattern. Supply side, the constraints from the reverse invoicing policy were unlikely to be reversed in the short term, and tightness in invoiced aluminum scrap would persist; on the import side, the combined effect of multiple bearish factors would gradually emerge over the coming months, and supplementation from high-quality overseas scrap would remain low. Demand side, amid a deepening off-season, downstream operating rates stayed low, end-user orders were unlikely to see substantive improvement, and scrap utilization enterprises continued to purchase as needed, making it difficult for purchasing sentiment to improve materially. The price difference between A00 aluminum and aluminum scrap has narrowed to a historical low, significantly weakening aluminum scrap’s cost advantage versus primary aluminum; if aluminum prices continue to fall, the substitution effect will accelerate.
Secondary Aluminum Alloy: Today, the overall ADC12 market continued to hold prices steady. Quotes from mainstream producers were basically flat, and the SMM ADC12 quotation remained steady at 24,100 yuan/mt compared with the previous trading day. On the one hand, recent aluminum price fluctuations were limited, and the cost side lacked new driving factors, while circulation of aluminum scrap remained tight, providing some support to secondary aluminum alloy prices; enterprises generally had weak willingness to adjust prices. On the other hand, end-use demand remained in the off-season, downstream order releases were insufficient, procurement was mainly based on rigid demand, and the market trading atmosphere was subdued. Some enterprises reported that demand weakened further compared with the earlier period. Against the backdrop of the tug-of-war between cost support and weak demand, the market overall maintained a cautious wait-and-see stance. It is expected that in the short term, ADC12 prices will remain stable while moving sideways within a narrow range. Going forward, focus should be placed on aluminum price fluctuations, changes in aluminum scrap supply, and improvement in downstream orders.
Outlook Summary: The Middle East situation repeatedly shifted, and market concerns about interest rate hikes remained. Supply continued to recover, but the destocking pattern was difficult to reverse in the short term. Amid the tug-of-war between longs and shorts, aluminum prices are expected to consolidate and adjust in the short term. Going forward, key focus should be placed on production resumptions progress and the trend of geopolitical conflicts in the Middle East, LME aluminum ingot inventory changes, as well as domestic downstream processing orders and aluminum semis exports data.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients are unrelated to SMM.]
