SMM Aluminum Market Morning Comment (Jun 26)

Overnight, the most-traded SHFE aluminum contract 2408 opened at 20,255 yuan/mt, reached a high of 20,345 yuan/mt, a low of 20,250 yuan/mt, and closed at 20,255 yuan/mt, down 105 yuan/mt, a decrease of 0.52%. The previous trading day, LME aluminum opened at $2,500/mt, reached a high of $2,513/mt, a low of $2,491/mt, and closed at $2,497/mt, down $6/mt, a decrease of 0.24%.

Summary: On the macro front, the US Fed's hawkish stance is clear, with the possibility of delaying rate cuts until next year and potential interest rate hikes depending on inflation data. Domestically, the policy of replacing old with new continues to gain momentum, with new real estate policies being introduced across various regions to further stimulate domestic consumption. On the fundamentals, domestic aluminum production capacity remains high. The rebound in aluminium billet conversion margins boosted the aluminum liquid alloying ratio, and the reduction in ingot production is noted. However, due to the continuous increase in aluminum supply and the low conversion margins for primary processed products like aluminum billets, aluminum ingot inventory is trending towards accumulation, with destocking facing resistance. According to the SMM survey, new orders in industries such as photovoltaics and automobiles are not ideal, and the operating rate of aluminum processing enterprises is expected to remain low in the short term. Against a weak macroeconomic backdrop, together with the weakening trend in downstream consumption expectations, market sentiment remains cautious. SMM expects aluminum prices to exhibit a wide range of fluctuations in the short term.