5.26 SMM Morning Meeting Minutes
Futures:SHFE aluminum closed at 24,370 yuan/mt in the night session on May 25, down 0.39% from the previous close. The price closed near below MA5 (24,429.41), and below MA10 (24,459.33), MA20 (24,514.46), MA40 (24,602.01), and MA60 (24,638.88), with the moving average system in a bearish alignment. Technical side, the MACD 4-hour indicator DIFF crossed below DEA to form a death cross, with the histogram turning green. Combined with bears actively adding positions, this indicated that bearish momentum was still being released at the margin, with bears having the upper hand. The London Metal Exchange (LME) was closed on May 25 for a UK bank holiday and will resume trading on May 26.
Macro front:According to a report by Al Jazeera on May 25, Iranian officials stated that the Strait of Hormuz would be reopened in phases. According to CME FedWatch: the probability of the US Fed keeping interest rates unchanged through June was 99.9%, with a 0.1% probability of a cumulative 25 basis point interest rate cut. The probability of the US Fed keeping interest rates unchanged through July was 90.3%, with a 9.6% probability of a cumulative 25 basis point interest rate hike, and a 0.1% probability of a cumulative 25 basis point interest rate cut.
Fundamentals:Entering Q2, China's aluminum foil exports exhibited a typical geopolitically-driven cyclical boom: on one hand, some double zero foil production lines switched to battery foil production, leading to a contraction in traditional packaging foil supply. Combined with overseas clients rushing to export ahead of concerns over a prolonged Strait of Hormuz blockade, enterprise production schedules had been extended to late June to July, with double zero standard pouch export processing fees surging to $1,000-1,200/mt. On the other hand, high processing fees themselves were already slowing the pace of clients placing additional orders, and the widening price spread between domestic and overseas markets had not brought a significant increase in orders (above 20%), indicating that the actual shortage outside China was limited, with incremental volumes driven more by precautionary restocking rather than a full recovery in end-use demand. Inventory side, aluminum billet inventory in major consumption areas in China was 190,500 mt on May 25, down 15,000 mt WoW from Thursday and down 27,000 mt WoW from Monday.
Primary aluminum market:In the early session, SHFE aluminum 2606 contract traded in a range, with the overall price center moving lower compared to the previous trading day. Some buyers had strong bullish sentiment, and as the impact of tax ticket discounts gradually eased, overall buying sentiment in the market picked up somewhat, with some sellers holding prices firm. Mainstream spot quotes in the market were at SMMA00 average price to +10 yuan/mt. Yesterday, the east China market shipment sentiment index was 3.06, flat MoM; the purchasing sentiment index was 3.16, up 0.06 MoM. Recently, the price spread between Henan and Shanghai was relatively small and above long-term contract prices. Buying sentiment among downstream processing enterprises in the central China market was low, with a preference for long-term contract settlement, and overall market transactions were sluggish. Moreover, aluminum prices surged at the opening, and suppliers offered relatively low prices with weak willingness to hold prices firm. Ultimately, the actual transaction price range in the central China market hovered between a premium of 20 yuan and a discount of 30 yuan to the central China price. Yesterday, the central China market shipment sentiment index was 2.84, flat MoM; the procurement sentiment index was 2.26, down 0.02 MoM.
Aluminum scrap:Yesterday, the SMM A00 price continued to edge down slightly, falling 40 yuan/mt from the previous trading day. The aluminum scrap market remained generally stable, with some regional varieties adjusting downward to catch up with recent declines. Price spread side, on May 25, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,586 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,210 yuan/mt. Operating rates of scrap utilization enterprises stayed low, end-user orders lacked follow-through, overall procurement pace trended conservative, and market transactions were sluggish. In addition, inventories of wrought aluminum alloy scrap such as door and window materials at some strip and plate mills in Henan had accumulated to relatively high levels, terminal finished product orders were weak, and downstream scrap utilization enterprises' actual procurement demand for raw materials contracted in tandem. Aluminum scrap market was expected to continue holding up well at high levels this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) staying at 20,500-21,100 yuan/mt (tax exclusive). Policy side, "reverse invoicing" regulation continued, and the tight pattern of compliant supply sources was difficult to reverse in the short term; the lagging effect of imported aluminum scrap continued to emerge, and the contraction in actual port arrivals was expected to further intensify tight supply; geopolitical risks provided bottom support for aluminum prices, which in turn pushed up aluminum scrap prices. However, the peak season effect was fully winding down, and end-user orders weakened somewhat; wrought aluminum alloy scrap inventories in Henan and other regions were relatively high, suppressing procurement demand, and the secondary aluminum market would continue its pattern of weakness in both supply and demand.
Secondary aluminum alloy:Spot cargo side, yesterday the ADC12 market overall continued its stable-price wait-and-see pattern, with the SMM ADC12 price holding steady from the previous day at 23,700 yuan/mt. The current core market contradiction remained concentrated between "weak demand" and "high costs": on one hand, downstream consumption recovery was limited, order performance was weak, putting pressure on prices; on the other hand, the issue of missing invoices for aluminum scrap persisted, compliant raw material supply was tight, enterprises faced difficulties in replenishing raw materials, and cost support remained relatively strong. Under the two-way supply-demand game, ADC12 prices were expected to continue moving sideways in the short term, with overall market sentiment remaining cautious.
Aluminum Market Summary:Macro front, as the market pinned hopes on reaching a peace agreement to end the Iran war, the US dollar and oil prices pulled back accordingly, easing concerns about intensifying inflation and rates "staying high for longer." Although both the US and Iran downplayed the possibility of reaching an agreement in the near term, market sentiment remained optimistic. Recently, the heads of state of the U.S. and Russia have been visiting China in succession, with preliminary outcomes expected in the economic and trade fields. On the fundamentals side, supply shortages and low inventories outside China continue to provide bottom support, but elevated domestic inventories remain the core factor suppressing significant price rallies. In addition, weak trading performance in the spot market further limits the upside room for aluminum prices. In the short term, aluminum prices are expected to continue the pattern of LME outperforms SHFE and move sideways.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not use this as a replacement for independent judgment. Any decisions made by clients are not related to SMM.]
