Geopolitical Uncertainties Persist, Domestic and International Aluminum Prices Diverge in Volatile Trading [SMM Aluminum Morning Meeting Minutes]

6.3 SMM Morning Meeting Minutes

Futures:The most-traded SHFE aluminum 2607 contract closed at 24,775 yuan/mt, up 0.79%. The price moved near the range of MA5 (24,503.00), MA10 (24,490.00), MA30 (24,641.50), and MA60 (24,701.33), with short- and medium-term moving averages intertwined and converging. The overall structure remained range-bound, with support and resistance from moving averages interlaced. The MACD indicator DIF (-37.7078) was above DEA (-69.8220), with the MACD red bar at 64.2284, having formed a golden cross, indicating that bullish momentum was gradually recovering. The suggested core trading range for SHFE aluminum is 24,350-25,000. The LME aluminum 3M contract closed at $3,760.50/mt, up 0.75%, closing higher and strengthening. The price stood firmly above MA5 (3,695.10), MA10 (3,666.15), MA30 (3,594.60), and MA60 (3,507.32), with moving averages overall in a bullish alignment and the medium-term uptrend remaining solid. The MACD indicator DIF (53.2870) was above DEA (43.5749), with the histogram positive (19.4242), having formed a golden cross, indicating sustained release of bullish momentum. The suggested core trading range for LME aluminum is 3,550-3,820.

Macro front:According to Iranian sources, the Strait of Hormuz vessel transit permit application system has been fully opened, allowing global shipowners and captains to submit transit applications. After approval, vessels will be granted transit permits. Iranian media disclosed that Iran-US information exchanges "have been suspended for several days," and despite some Western media and officials claiming they are still proceeding normally, the actual situation is otherwise. US Secretary of State Rubio stated that the US is still negotiating with Iran, but he is uncertain when an agreement can be reached. US President Trump signed a document temporarily adjusting tariffs on certain imported steel, aluminum, and copper products, effective from June 8 and expiring on December 31, 2027. Specifically, the ad valorem import tariff applicable to harvesters and certain other agricultural machinery was reduced from 25% to 15%, and the threshold for local content ratio of steel, aluminum, and copper in imported products was lowered from 95% to 85%. Hawkish voices within the US Fed continued to intensify. Cleveland Fed President Hammack stated that while maintaining the current interest rate remains reasonable, if recent inflation data continues to stay high, policymakers may soon need to take action—including considering further rate hikes to address the risk of persistently elevated inflation.

Fundamentals:Supply disruptions in the Middle East persisted, with ceasefire prospects and setbacks coexisting. The pace of navigation resumption through the Strait of Hormuz remained uncertain, and geopolitical premiums persisted. The rigid supply gap outside China became more visible, with total LME inventory declining from approximately 363,000 mt at the beginning of the month to 338,000 mt at month-end, a decrease of approximately 25,000 mt for the full month, with inventory levels at historically extremely low levels. Inventory side, aluminum ingot inventory in major consumption areas rose 0.6 WoW yesterday, with the inventory buildup mainly from Wuxi and Gongyi.

Primary aluminum market:SHFE aluminum 2506 contract fluctuated upward in early trading, with the overall price center moving higher compared to the previous trading day. Affected by rising aluminum prices, downstream purchase sentiment weakened significantly, with selling sentiment notably higher than purchasing sentiment yesterday. Mainstream spot quotes in the market ranged from SMMA00 minus 10 yuan/mt to the average price. Yesterday, the east China market selling sentiment index was 3.01, up 0.07 WoW; the purchasing sentiment index was 2.83, down 0.08 WoW. Entering the June off-season, downstream processing enterprises in central China saw weak orders. Combined with rising aluminum prices, purchase willingness was low. However, suppliers tended to sell in large volumes when aluminum prices rebounded, with weak willingness to hold prices firm. Overall market transaction atmosphere remained sluggish, with quotes continuing to decline. The actual transaction price range in the central China market ultimately hovered around a discount of 190-210 yuan/mt against SHFE aluminum 06 contract. Yesterday, the central China market selling sentiment index was 2.88, up 0.03 WoW; the purchasing sentiment index was 2.18, down 0.01 WoW.

Aluminum scrap:Yesterday, SMM A00 price rose 140 yuan/mt compared to the previous trading day, and the aluminum scrap market followed the uptrend overall. Supply side, the tightening regulatory stance on the "reverse invoicing" policy continued, with compliance costs in the aluminum scrap recycling process remaining elevated. Available invoiced sources were tight, and the core support for aluminum scrap prices was invoice scarcity rather than actual demand boost. Meanwhile, affected by the persistently inverted price spread between domestic and ex-China aluminum scrap due to US-Iran conflict disruptions, high-quality low-priced sources from outside China were scarce, and the import channel's supplementation to domestic supply continued to weaken. Demand side, with the off-season approaching, scrap utilization enterprises operated at low rates, and end-user orders lacked follow-through. Scrap utilization enterprises overall maintained a strategy of purchasing as needed with low inventory, and the overall purchasing atmosphere was cautious. Aluminum scrap market was expected to continue holding up well at high levels this week, with shredded aluminum tense scrap (priced based on aluminum content) mainstream range maintained at 20,300-20,900 yuan/mt (tax exclusive). The "reverse invoicing" policy constraints persisted, and the tight pattern of compliant invoiced sources was difficult to reverse in the short term. The lagged contraction effect of imported aluminum scrap had not been fully released, and subsequent port arrivals would continue to run at low levels. However, with the off-season approaching, the sustainability of subsequent orders for scrap utilization enterprises was concerning, and incremental end-use demand was limited.

Secondary aluminum alloy:Spot side: ADC12 prices overall held up well yesterday, with most enterprises raising quotes by 100 yuan/mt, and some enterprises subsequently following futures to increase by another 100-200 yuan/mt. Current market contradictions remained concentrated on the raw material side. Under the backdrop of tightening invoice regulation, compliant aluminum scrap resources available for enterprise procurement were limited, and raw material procurement difficulty and costs continued to rise. Some enterprises have cut production, leading to marginal contraction in market supply, while tight spot circulation resources and localized shortages are gradually emerging. Under the dual effects of cost support and supply contraction, enterprises' willingness to increase prices has strengthened notably. In the short term, ADC12 prices still have room to move higher, and subsequent attention should focus on policy changes, aluminum scrap circulation conditions, and downstream purchase pace.

Aluminum market summary:If the US-Iran ceasefire agreement materializes, it will significantly ease Middle East supply concerns, but recurring military frictions leave peace prospects uncertain. The US Fed is highly likely to keep interest rates unchanged at its June meeting, but the hawkish tone and inflation stickiness will continue to suppress interest rate cut expectations, with a stronger US dollar continuing to weigh on aluminum prices. Rigid supply gaps ex-China support a stronger LME aluminum, while China's inventory destocking has begun to emerge but remains weak in magnitude, limiting SHFE aluminum's upside elasticity, with the LME outperforms SHFE pattern continuing in the short term. Subsequent focus will be on whether China's inventory destocking accelerates, whether the US-Iran agreement can be formally signed, further clarity on the US Fed's interest rate path, and whether China is further regulating aluminum capacity operations. In the short term, aluminum prices will maintain a pattern of LME outperforms SHFE while moving 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 substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]