Destocking Logic Continues to Materialize, Macro Pressure Caps Aluminum Price Upside [SMM Aluminum Morning Briefing]

SMM Morning Briefing on June 18

Futures: The most-traded SHFE aluminum contract opened at 23,900 yuan/mt in the night session on June 17, with the highest price at 23,950 yuan/mt, the lowest at 23,860 yuan/mt, and finally closed at 23,940 yuan/mt, up 0.25% from the prior close. During this period, prices rebounded from lows to repair and formed a small bullish candlestick, under pressure near the 5-period moving average at 23,920.11, while still trading below all medium and long-term moving averages—MA10 (23,968.82), MA20 (24,065.18), MA40 (24,212.87), and MA60 (24,308.99)—all of which maintained a bearish downward alignment. The previous low of 23,725 offered effective support, and short-term downward momentum continued to slow. Trading volume reached 35,900 lots, shrinking from the previous session, while open interest stood at 216,000 lots, down by 3,364 lots, as the futures continued to show bearish position-reduction characteristics. From a technical perspective, in the 4-hour MACD indicator, the DIFF (-124.37) remained below the DEA (-116.59), maintaining a death cross structure, and the green bar STICK reading was -15.56. Bearish momentum visibly contracted versus earlier, but the bear-dominated pattern remained intact. LME aluminum opened at $3,391.0/mt on June 17, with the highest price at $3,433.0/mt, the lowest at $3,389.0/mt, and finally closed at $3,424.5/mt, up 0.99% from the prior close. On the day, prices rebounded mildly from lows after a sharp decline, under pressure below the 5-period moving average at 3,436.06, while also trading below all medium and long-term moving averages—MA10 (3,492.56), MA20 (3,545.17), MA40 (3,546.55), and MA60 (3,508.55)—with all these moving averages overall maintaining a bearish downward alignment. The prior low of 3,334.0 provided temporary support, and short-term downward momentum eased somewhat. Trading volume totaled 20,993 lots, sharply shrinking from the prior session, while open interest was 617,000 lots, down by 17,153 lots, reflecting bearish position reduction on the futures. Technically, in the daily MACD indicator, the DIFF (-38.57) stayed below the DEA (-5.57), keeping a death cross structure, and the green bar STICK reading was -65.99. Bearish momentum contracted slightly versus earlier, though the bear-dominated pattern remained unchanged.

Macro Front: The US Fed’s monetary policy meeting this week, as widely expected, kept rates on hold. The post-meeting statement underscored its commitment to price stability in bringing down elevated inflation, while the dot plot reflected a strongly hawkish tilt among policymakers. On Wednesday, June 17, Eastern Time, the Fed announced after its FOMC meeting that it would maintain the target range for the federal funds rate unchanged at 3.50% to 3.75%. Following three consecutive rate cuts through year-end last year, the FOMC has now held rates steady at all four monetary policy meetings so far in 2026.

Fundamentals: Against the backdrop of India's supply gap yet to be filled, uncertainties in Middle East transport, and domestic expansion projects being a distant solution to an immediate need, China's export window for can stock to India is expected to remain open through 2026. However, it must be clearly recognized that the driving force behind this round of export expansion mainly comes from supply-side disruptions and policy exemptions, rather than a proactive shift in India's procurement demand from China, lacking a foundation for long-term cooperation. Combined with multiple constraints such as policy risks from the sunset review, unfavorable economics of finished can transportation, and the gradual recovery of India's domestic supply capacity, future incremental room and sustainability of China's can stock exports to India still face considerable uncertainty. Inventory side, as of Thursday, aluminum ingot inventory in major domestic consumption areas stood at 1.255 million mt, destocking 35,000 mt from Monday this week and 57,000 mt from last Thursday.

Primary Aluminum Market: In early trading, the SHFE aluminum 2606 contract fluctuated upward, with the center of its trading range above the same period yesterday. However, with aluminum prices holding near recent lows, buying sentiment remained relatively active, driving sellers' quotes and transaction prices to continue strengthening. Yesterday, affected by the rise in aluminum prices, some sellers' selling sentiment edged up from the previous day. The mainstream spot transaction price was at a discount of 60-80 yuan/mt against the SHFE aluminum 2607 contract. In east China, the sell-side sentiment index was 2.91 yesterday, up 0.08 from the previous day; the buy-side sentiment index was 3.06, flat. As futures prices held at the low for the month, traders holding cargo in central China yesterday showed strong sentiment to hold prices firm and hold back from selling, tending to quickly narrow premiums to profit from price spreads. However, downstream processing enterprises showed low willingness to purchase at high prices, leading to a tug-of-war between holding prices firm and pushing for lower prices, and premiums trended lower. Ultimately, the actual transaction price range in the central China market was at a discount of 100-130 yuan/mt against the SHFE aluminum 2607 contract. In central China yesterday, the sell-side sentiment index was 2.92, up 0.01 from the previous day; the buy-side sentiment index was 2.21, down 0.01.

Aluminum Scrap: Yesterday, the SMM A00 price rose 60 yuan/mt from the previous trading day to 23,860 yuan/mt, while the aluminum scrap market saw mixed changes. As corporate tax costs increased by over 2% compared to the same period last year, the price difference between A00 aluminum and aluminum scrap narrowed, strengthening the floor support for aluminum scrap prices. Supply side, regulatory oversight of the "reverse invoicing" policy continued to tighten, with tax rebates canceled in some provinces and tax audits strengthened, leading to higher costs for invoiced raw materials. Production cuts and shutdowns further spread among enterprises in Anhui, Jiangxi, Hubei, and other regions. Currently, high compliance costs in the raw material recycling sector kept available invoiced supply tight, and the scarcity of invoices became a core support for aluminum scrap prices. Moreover, the price spread between Chinese and overseas markets stays inverted, and scarce low-cost, high-quality imports have further weakened the supplement to the domestic market. Demand side, the off-season effect continues to deepen. Downstream scrap utilization enterprises operate at low operating rates, end-use order follow-through is sluggish, and enterprises maintain a strategy of purchasing as needed and low inventory, with a cautious purchasing atmosphere. Downstream die-casting enterprises' orders remain sluggish, procurement is mainly based on rigid demand and small batches, and there is insufficient willingness to chase rising prices, keeping market transaction activity persistently low. End-use consumption is unlikely to see substantial improvement, and the demand side continues to suppress the upside room for prices. Aluminum scrap market prices are expected to continue to fluctuate at highs in a weak pattern, but downside room is limited. The tightness of compliant invoice-bearing supply persists, and invoice scarcity provides bottom support for aluminum scrap prices. The lagged contraction effect of imported aluminum scrap has not yet fully materialized, and subsequent port arrivals will run at low levels. Meanwhile, against the backdrop of the deepening off-season, the sustainability of orders for downstream scrap utilization enterprises is worrisome. Enterprises maintain a strategy of purchasing as needed and low inventory, and the purchasing atmosphere is unlikely to see significant improvement, resulting in an overall pattern of weak supply and demand.

Secondary Aluminum Alloy: Spot market: Yesterday, the ADC12 market was generally stable. SMM ADC12 quoted price yesterday held steady at 24,100 yuan/mt. Based on feedback, tight tax invoices and tight supply of aluminum scrap raw materials remain the core supporting factors in the current market. Against the backdrop of continuous advancement in reverse invoicing and compliance supervision, enterprises' procurement costs and tax burdens stay high, significantly limiting the downside room for prices. Some enterprises still have the need to repair profits and pass on costs. Demand side, market performance was relatively mediocre. Demand in the automotive industry chain remained weak, pre-holiday stockpiling sentiment was insufficient, and the release of new orders was limited. Only orders from motorcycles and some sub-sectors performed moderately. Currently, no obvious supply shortage has appeared, and supply and demand as a whole maintain a weak balance. Short-term prices are expected to mainly fluctuate at highs, with tight tax invoices and scrap supply providing bottom support. Future focus should be on the demand recovery in H2 and the continued impact of tax invoice constraints on the supply side. If demand recovers after the peak season arrives while supply release is restricted, market prices may still have further upside room.

Aluminum Market Summary: Macro front, the easing of Middle East geopolitics has caused aluminum's geopolitical risk premium to subside. The US Fed kept interest rates unchanged, and the dot plot released hawkish signals. Coupled with high US inflation, interest rate hike expectations continue to weigh on aluminum price valuations. Fundamentals side, the previous Middle East conflict had caused continuous passive production cuts in overseas aluminum capacity, with a long repair cycle for damaged capacity. The expectation of a widening global annual supply deficit remains, and combined with rising energy cost expectations, this provides strong bottom support for LME aluminum. In China, the destocking trend has been established, and the destocking logic is continuously being realized. The rebound in the proportion of liquid aluminum, support from export demand, and the reduction in aluminum ingot formation volume driven by supply normalization—three fundamental factors jointly drive the continuation of destocking. SMM maintains its judgment that inventory will drop to around 1.28 million mt by late June, and it is expected to further approach 1.2 million mt by late June to early July, bringing some support to aluminum prices. However, the pressure from high domestic inventory remains relatively evident, and coupled with the current bearish macro sentiment dominating the market, short-term domestic aluminum prices are mainly fluctuating and adjusting.

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