Inventory Trends Diverge Significantly in and outside China, Aluminum Prices Continue with LME Outperforms SHFE [SMM Aluminum Morning Meeting Minutes]

SMM Morning Meeting Minutes, 4.24

Futures:The most-traded SHFE aluminum 2606 contract closed at 25,005 yuan/mt in the night session, down 0.22%. The price fell below MA10 (25,094.5) but remained above MA30 (24,701.63) and MA60 (24,524.42), with short-term moving averages forming resistance while medium-term support held. The MACD indicator DIF (165.03) crossed below DEA (169.98), with the histogram turning negative (-9.9), forming a death cross and indicating weakening bullish momentum. The suggested core trading range for SHFE aluminum is 24,700-25,200. LME aluminum closed at $3,604/mt, up slightly by 0.17%, moving sideways. The price traded above MA5 (3,580.5) but slightly below MA10 (3,592.45), with moving averages converging and the short-term direction unclear. The MACD indicator DIF (74.06) and DEA (75.1) formed a death cross at elevated levels, with the histogram slightly negative (-2.08), indicating exhaustion of upward momentum. The suggested core trading range for LME aluminum is 3,570-3,650.

Macro Front:A Pakistani diplomat stated that US-Iran negotiations had "reached a deadlock" with "very slow" progress. The US remained committed to maintaining its naval blockade on Iran, while Iran considered the US blockade an obstacle to its participation in negotiations, stating that reaching an agreement with the US would take time and that "there should be no rush" on the negotiation issue. The shipping lanes through the Strait of Hormuz remained tightly locked, posing severe challenges to the "major artery" of global energy and supply chains. The International Monetary Fund issued a stern warning that if the conflict persisted for months, global economic growth in 2026 could shrink to 2%.

Fundamentals:Markets outside China continued to be affected by geopolitical disruptions, with navigation through the Strait of Hormuz still not fully restored. Combined with ongoing production cuts at aluminum smelters in the Middle East due to the impact of the regional situation, the global aluminum market supply deficit further intensified, and the ex-China aluminum fundamentals exhibited a relatively significant supply-demand gap. This week, the LME aluminum Cash-3M premiums structure continued to recover, with the price spread rebounding to $57.07/mt. Meanwhile, LME aluminum inventory continued its destocking trend, with total inventory pulling back to a relatively low level of 378,800 mt, providing strong support for ex-China aluminum prices. Chinese market side, downstream processing enterprises' overall operating rate pulled back this week. Combined with aluminum prices currently at elevated levels, this suppressed downstream enterprises' enthusiasm for cargo pick-up to some extent. Additionally, some aluminum ingots in the Wuxi area were still pending warehousing, creating visible backlogs. China's aluminum ingot social inventory saw an inventory buildup of 12,000 mt WoW this week, and whether the subsequent inventory inflection point will materialize as expected still requires continuous tracking and verification.

Primary Aluminum Market:Yesterday morning, SHFE aluminum 2605 fluctuated downward, with overall morning prices higher than Wednesday. Affected by rising aluminum prices, end-users mainly made just-in-time procurement. Sellers' offers remained firm, and mainstream market transactions were concentrated in the range from SMM A00 aluminum minus 10 yuan/mt to the average price. Yesterday, the shipments sentiment index in the east China market was 3.42, up 0.06 MoM; the purchase sentiment index was 3.26, down 0.01 MoM. With the weekend and Labour Day holiday approaching, some traders started stockpiling demand in advance, and after invoicing quotas were reduced, cargoes with invoices dated this month became scarce in the market. Trading activity in the central China market picked up in recent days. However, downstream processing enterprises still had low acceptance of high aluminum prices, preferring to close deals at lower prices. The actual transaction price range mainly centered between central China price plus a premium of 20 yuan and central China price minus a discount of 10 yuan. Yesterday, the shipments sentiment index in the central China market was 2.82, down 0.02 MoM; the purchase sentiment index was 2.4, flat MoM.

Aluminum scrap:Yesterday, spot primary aluminum rose 10 yuan/mt from the previous trading day, while aluminum scrap market prices remained generally stable. Price difference between A00 aluminum and aluminum scrap side, on April 23, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,748 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,888 yuan/mt. Supply side, tightening regulation on reverse invoicing and the cancellation of tax rebates led to tight compliant invoiced supply. Import side, aluminum scrap imports in March reached 197,300 mt, surging 44.75% MoM, but import traders became increasingly cautious in purchase sentiment due to continuously rising LME prices, and imports are expected to pull back going forward. Demand side, the "Golden March, Silver April" peak season saw divergent production starts — the aluminum tense scrap segment purchased as needed and operated with low inventory, with transactions dominated by rigid demand and strong wait-and-see sentiment, while the wrought aluminum alloy scrap segment had some support from peak-season stockpiling but with limited strength. Overall, supply-side policy constraints are unlikely to ease in the short term, tight compliant supply combined with holders holding back from selling provided support, and the increasing probability of a pullback in subsequent imports will further intensify the tight supply situation. Demand side, the divergence between aluminum tense scrap and wrought aluminum alloy scrap downstream remained unchanged, and aluminum price fluctuations and lack of orders continued to suppress purchase willingness. In the short term, the uncertain outlook for US-Iran conflicts, tight compliant supply, and the expected pullback in aluminum scrap imports will support aluminum scrap prices to hold up well.

Secondary aluminum alloy:Spot cargo side, the ADC12 market held steady yesterday. Affected by aluminum prices moving sideways, the cost side lacked clear directional guidance, and enterprises generally had little willingness to adjust prices; meanwhile, downstream demand remained weak with insufficient order follow-through, putting some pressure on prices. Against the backdrop of weak supply and demand, wait-and-see sentiment in the market intensified, with transactions dominated by rigid demand. In the short term, ADC12 prices are expected to continue moving sideways, and subsequent trends need to focus on aluminum price fluctuations and downstream purchase sentiment ahead of the Labour Day holiday.

Aluminum market summary:Negotiations in the Middle East experienced twists and setbacks, and geopolitical risks have not been fully cleared, but the continuously widening ex-China supply gap and steady LME inventory drawdowns jointly supported LME aluminum prices to hold up well; in China, aluminum ingot social inventory remained at elevated levels, and the strength of demand recovery and the pace of inventory drawdown became the core variables influencing SHFE price trends.

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