[summary of SMM Morning meeting] High profit transmission of electrolytic aluminum prices boosts the price of raw materials

SMM internal aluminum morning meeting minutes: last Friday, aluminum rose slightly in the inner and outer session. Lomalco closed at 1612 US dollars / ton yesterday, up 0.74%, or 12 US dollars / ton. Shanghai Aluminum's main 2008 contract rose 0.43% to 14055 yuan / ton. The dollar index fell 0.05 per cent to 97.163.

Macro aspect: 1) according to the real-time data of Johns Hopkins University in the United States, there were 192400 new confirmed cases of new crown pneumonia worldwide on July 4, including 45300 confirmed cases of new crown pneumonia in the United States. There were a total of 11.2795 million confirmed cases and a total of 531100 deaths in the world on July 5, 1615, up to Beijing time. (bearish) 2) China Union of things: China's commodity index (CBMI) in June 2020 was 105.2%, down 0.7% from the previous month. Among the sub-indices, the supply index continued to rise, the sales index fell somewhat, and the inventory index rebounded. (bearish) 3) A number of economic and financial data for June will be released in the near future. It is expected that CPI may be suspended in June, and the follow-up trend will gradually repair as the epidemic subsides; the year-on-year decline in PPI narrows; the scale of new credit and new social finance remains unchanged; imports and exports continue to recover, and the monthly improvement trend of foreign trade data is expected to continue. (lidocaine)

Fundamentals: 1) SMM survey: the start-up of leading enterprises in downstream aluminum processing has declined to a certain extent this week, with the exception of profile enterprises, other processing enterprises have shown a certain decline in start-up, including the original aluminum processing section, primary alloy, aluminum cable start-up decline is more significant. (bearish) 2) domestic bauxite prices rose slightly during the week compared with the previous month, with ore prices in northern Shanxi and Sanmenxia rising by 20 Mel and 30 yuan per ton. 3) Alumina: alumina prices rose greatly during the week, mainly due to the background of continuous upward transmission of downstream profits, the news of alumina production reduction in the north fermented rapidly, domestic alumina prices rose smoothly, and due to the continuous expansion of demand in the southwest, the negative price difference between north and south alumina has recently turned to flat water to small rising water. (Lido) 4) during the week, the supply of aluminum bars increases and the demand weakens, and the pressure on processing fees falls; (negative)

Spot side: last Friday, the spot price in Shanghai was between 14390 and 14410 yuan / ton, while the price in Wuxi was between 14410 and 14430 yuan / ton, which was basically the same as the previous day's price. A large family receives the goods normally, the quotation is reasonable, the shipper is active, the middleman is slightly less willing to receive the goods, the goods in Shanghai are not as popular as the tin-free goods, and the trading between the two sides is general. Due to the demand for inventory downstream near the weekend, the enthusiasm of receiving goods on Friday was significantly higher than the previous two days, but due to the high spot price, the purchase volume was still lower than expected. On the whole, the deal in East China is OK. In the afternoon, the price of the consignor is around 14410 yuan / ton, and the price is around 120 yuan / ton. The market is light and there is almost no deal. This morning, spot transactions focused on rising water around 110 yuan / ton in the same month.

Conclusion: from a macro point of view, China is still in the background of vigorously regulating the economy by macro policies, and all kinds of economic indicators have been repaired. From a fundamental point of view, the social inventory of aluminum ingots continues to decline, futures warehouse receipts remain low, downstream consumption is OK, aluminum prices are still high, and due to the bottom-up profit transmission mechanism from downstream to upstream, the prices of major raw materials have increased significantly. It is expected that the future electrolytic aluminum price will still maintain a strong volatility trend, and the long-term aluminum price will still maintain the previous point of view, so we need to focus on the signs of weakening of the long-term demand side.