Geopolitical Negotiations Remain Unresolved, Aluminum Prices Continue LME Outperforms SHFE Pattern [SMM Aluminum Morning Meeting Minutes]

4.21 SMM Morning Meeting Minutes

Futures:SHFE aluminum closed at 25,130 yuan/mt, down 0.32%. The price operated below MA5 (25,269) but above MA10 (25,026), MA30 (24,738.83), and MA60 (24,486.08), indicating short-term pressure but solid medium-term moving average support. The MACD indicator DIF (219.57) and DEA (167.76) maintained a golden cross above the zero axis, while the histogram narrowed to 103.62, suggesting continued weakening of bullish momentum. The recommended core operating range for SHFE aluminum is 24,900–25,400. LME aluminum closed at $3,553/mt, up slightly by 0.16%. The price fell below MA5 (3,582.4) and slightly below MA10 (3,555.3), with short-term moving average resistance emerging, yet it remained well above medium and long-term moving averages such as MA30 (3,432.55), leaving the upward trend intact. The MACD indicator DIF (76.5) and DEA (75.3) formed a golden cross, but the histogram narrowed significantly to 2.41, indicating fading upward momentum. The recommended core operating range for LME aluminum is 3,520–3,570.

Macro Front:The temporary US-Iran ceasefire agreement is set to expire on April 22, with a new round of negotiations still pending. US Vice President Vance was to arrive in Islamabad, Pakistan's capital, to participate in the second round of US-Iran talks. However, Iran stated that due to the US side's constantly shifting words and actions, Iran harbored "deep distrust" toward the US and had not yet decided whether to participate in the second round of negotiations. Meanwhile, Pakistan continued active mediation efforts. US President Trump said he would be willing to meet with senior Iranian leaders if negotiations achieved a breakthrough, but that it would be "almost impossible" for him to extend the ceasefire with Iran further if no agreement was reached.

Fundamentals:Supply side, affected by large-scale production cuts at Middle Eastern aluminum smelters, the ex-China aluminum fundamentals showed a clear supply gap; in terms of price trends, LME aluminum outperformed SHFE aluminum, the SHFE/LME price ratio declined, and import losses widened. China's net primary aluminum imports are expected to decrease, but as operating aluminum capacity in China stayed high, the supply-side fundamentals had not yet shown a clear gap. Demand side, affected by reduced aluminum supply, surging energy costs, and tight oil supply, some downstream processing plants outside China saw production cuts or shutdowns; within China, as the peak season deepened, downstream operating rates rebounded, coupled with incremental export orders for some aluminum products, demand performance was moderate. However, aluminum billet processing fees performed only average, with some billet plants seeing production contraction. Overall aluminum billet operating rates rebounded below expectations. Overall, liquid aluminum weekly operating rate declined by 0.08 percentage points last week. On Monday, nationwide aluminum ingot social inventory saw an inventory buildup of 30,000 mt WoW Thursday, of which the Wuxi area saw an aluminum ingot inventory buildup of 18,000 mt WoW Thursday. Whether the social inventory inflection point will arrive smoothly deserves attention.

Primary aluminum market: Yesterday morning, SHFE aluminum 2605 fluctuated downward, but overall aluminum prices remained at high levels. End-users mainly made just-in-time procurement, and traders' buying sentiment was relatively positive, influenced by declining aluminum prices and widening premiums. Mainstream transactions were concentrated around SMM A00 aluminum -10 yuan/mt to +10 yuan/mt. Yesterday, the east China market shipment sentiment index was 3.4, down 0.32 WoW; the procurement sentiment index was 3.06, flat WoW. Yesterday, SHFE aluminum prices pulled back somewhat, but high aluminum prices continued to suppress buying sentiment in the central China market. Downstream processing enterprises mostly adopted a wait-and-see approach, and actual transactions saw slight price pressure. However, overall buying sentiment recovered compared to the previous two days. Suppliers had a strong willingness to hold prices firm, transaction prices remained stable, and the downward trend was not significant. Ultimately, actual transaction prices in the central China market ranged between the central China price plus a premium of 20 yuan and parity. Yesterday, the central China market shipment sentiment index was 2.85, flat WoW; the procurement sentiment index was 2.39, up 0.04 WoW.

Aluminum scrap: Yesterday, spot primary aluminum pulled back 250 yuan/mt from the previous trading day, and aluminum scrap market prices adjusted downward accordingly. Supply side, regulatory enforcement of the "reverse invoicing" policy continued to tighten, compliance costs in the aluminum scrap recycling process remained elevated, and available sources with proper invoices remained tight. Suppliers at scrap yards held back from selling with strong price-holding sentiment. Some regional traders adopted a wait-and-see approach on high-priced sources and locked in volumes, resulting in low actual market circulation. Demand side, the "Golden March, Silver April" peak season demand remained sluggish. Downstream aluminum tense scrap-based scrap utilization enterprises continued to purchase as needed and operate with low inventory, with limited willingness to accept high-priced resources, maintaining a conservative overall procurement pace. Wrought aluminum alloy scrap-based enterprises were in their production peak season with relatively higher stockpiling enthusiasm, but their support for prices remained limited. Regarding the price difference between A00 aluminum and aluminum scrap, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 3,025 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,950 yuan/mt. The aluminum scrap market is 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) expected to operate around 21,000-21,500 (tax-exclusive). Supply-side policy constraints are unlikely to ease in the short term, and the tight supply of compliant sources is expected to persist. The Strait of Hormuz transit risk triggered by the US-Iran conflict has not fully subsided, and high aluminum prices along with suppliers' reluctance to sell provide price floor support. However, demand-side peak season recovery fell below expectations, with downstream scrap utilization enterprises generally maintaining low inventory and purchasing as needed strategies, and high prices suppressing overall transactions. In the short term, continued attention should be paid to the actual impact of the US-Iran conflict on aluminum price fluctuations and expectations for end-user order recovery, while remaining vigilant against the risk of aluminum prices retreating after rapid rise.

Secondary Aluminum Alloy:Spot cargo side, the ADC12 market was in the doldrums yesterday. Driven by the pullback in aluminum prices, cost support loosened somewhat, and enterprises generally lowered their quotes, with declines concentrated in the range of 100–200 yuan/mt. Demand side, downstream enterprises saw lackluster order performance, with procurement mainly driven by rigid demand, and market transactions struggled to see significant volume increases. Under the weak supply-demand landscape, the price center continued to shift downward. In the short term, ADC12 prices still face certain downward pressure, and attention should be paid to aluminum price fluctuations and marginal improvements on the demand side going forward.

Aluminum Market Summary:Macro front, the temporary US-Iran ceasefire agreement is about to expire on April 22, and the new round of negotiations remains uncertain. Iran's "deep distrust" of the US has cast a shadow over the negotiation outlook, with geopolitical risk premiums staying high and providing sustained support for aluminum prices. Ex-China, large-scale production cuts at Middle Eastern aluminum smelters widened the supply gap, LME aluminum rose sharply, the SHFE/LME price ratio declined, import losses expanded, China's net primary aluminum imports are expected to decrease, and the transmission support from LME to SHFE aluminum strengthened. Domestically on the demand side, the rebound in downstream operating rates during the peak season, combined with incremental export orders, showed moderate performance. However, weak aluminum billet processing fees led to production cuts at some enterprises, and the weekly operating rate of liquid aluminum edged down by 0.08 percentage points, indicating that the domestic consumption recovery was not comprehensively robust. Overall, the Middle East negotiation process has been fraught with twists and turns, but the ex-China supply gap and continued LME inventory drawdowns supported LME prices to hold up well. Meanwhile, China's aluminum ingot inventory remains at high levels, and attention should be paid to whether the domestic inventory inflection point can arrive smoothly.

[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 replace independent judgment with this information. Any decisions made by clients are not related to SMM.]