Ex-China supply disruptions combined with macro recovery strengthen aluminium price rise momentum

Stock image for referential purposes only

Futures: The most-traded SHFE aluminium 2606 contract closed at RMB 24,885 per tonne, up 1.32 per cent. The price was above MA5 (24,559.00), MA10 (24,603.50), MA30 (24,786.00), and MA60 (24,542.33), with short-term moving averages forming support and the price currently testing upward for a breakout. The MACD indicator DIF (-24.4164) was below DEA (7.8856), with the histogram negative (-64.6038), indicating weakening bearish momentum. The suggested core trading range for SHFE aluminium is 24,500-25,500. LME aluminium 3M closed at USD 3,660 per tonne, up 0.25 per cent, with the price edging up. The price was above MA5 (3,593.80), MA10 (3,555.50), MA30 (3,546.73), and also above MA60 (3,406.65), with short-, medium-, and long-term moving averages all forming support, indicating an overall bullish trend. The MACD indicator DIF (40.3546) was above DEA (36.9479), with the histogram positive (6.8135), indicating strengthening upward momentum. The suggested core trading range for LME aluminium is USD 3,550-3,700 per tonne.

Macro front: US President Trump arrived in Beijing by special aircraft on the evening of May 13, beginning a 3-day state visit to China. Nvidia CEO Jensen Huang, head of the AI chip giant, was invited at the last minute to join the delegation visiting China. Foreign Ministry spokesperson Guo Jiakun stated that China is willing to work with the US, upholding the spirit of equality, respect, and mutual benefit, to expand cooperation, manage differences, and inject more stability and certainty into a rapidly changing world. US April PPI rose 6 per cent YoY, the highest since December 2022, with core PPI up 5.2 per cent Y-o-Y, both far exceeding market expectations. Energy and transportation costs both climbed, with services inflation hitting a four-year high. The unexpected PPI inflation surge fuelled expectations for US Fed interest rate hikes, with the market now pricing in approximately a 50 per cent probability of a 25-basis-point rate hike within the year.

Fundamentals: Supply side, driven by high prices, aluminium smelter utilisation rates in China increased; downstream, the sector is gradually entering the off-season, with downstream demand appearing slightly soft. However, supported by macro tailwinds combined with China's export orders remaining positive, a turning point in China's social inventory is expected to emerge. Markets outside China were disrupted by geopolitical conflicts, with aluminium supply under pressure and spot premiums staying high; LME aluminium inventory continued destocking, hitting a multi-year historical low. Inventory side, today's regional social inventory of aluminium ingots was 1.428 million tonnes, a destocking of 12,000 tonnes compared to this Monday.

Primary Aluminum Market: Yesterday in the morning session, the SHFE aluminium 2606 contract fluctuated upward, with the overall price centre moving higher compared to the previous trading day. Yesterday, some sellers held prices firm, and end-users mainly made just-in-time procurement, while traders' buying sentiment improved somewhat. The mainstream spot quotations ranged from SMM A00 aluminium average price to SMM A00 minus RMB 10 per tonne. Yesterday, the shipment sentiment index in the east China market was 2.96, up 0.1 W-o-W; the procurement sentiment index was 2.86, up 0.06 W-o-W. Yesterday, the overall trading atmosphere in the central China market remained sluggish. Aluminum prices rebounded slightly, and buying sentiment was basically flat compared with Tuesday. Insufficient invoice quotas and limited orders continued to suppress buying sentiment of downstream processing enterprises. Ultimately, the actual transaction price range in the central China market hovered between parity and a discount of 10 yuan to the central China price, remaining relatively stable. Yesterday, the shipment sentiment index in the central China market was 2.82, flat W-o-W; the procurement sentiment index was 2.28, flat W-o-W.

Aluminum scrap: Yesterday, A00 aluminium price was raised by RMB 180 per tonne from the previous trading day, and aluminium scrap market prices generally followed the uptrend. Aluminum tense scrap prices in some regions chose to hold steady in a wait-and-see mode. The mainstream price range of shredded aluminium tense scrap (priced based on aluminium content) hovered around RMB 20,500-21,000 per tonne (tax exclusive). The weekly price range of imported zorba (Ningbo Port) was raised by RMB 200 per tonne to RMB 21,870-22,070 per tonne (tax inclusive). In terms of the price difference between A00 aluminium and aluminium scrap, on May 13, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was recorded at RMB 2,745 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 2,208 per tonne. Supply side, the tightening trend of compliant invoice sources intensified, raw material prices swung wildly, and aluminium scrap yards generally held back from selling and held prices firm. High LME prices led import traders to adopt a cautious strategy, and subsequent imports are expected to pull back. Demand side, the traditional off-season combined with prominent compliant invoice issues led some regional enterprises to reduce or halt production. Wrought aluminium alloy scrap was supported by secondary aluminium plate/sheet and strip operating rates, but the support was limited. Downstream purchases were mainly just-in-time procurement with strong wait-and-see sentiment. This week, the aluminium scrap market is expected to continue to be in the doldrums, with the mainstream price range of shredded aluminium tense scrap (priced based on aluminium content) maintained at RMB 20,500-21,300 per tonne (tax exclusive). Supply side, policy constraints are unlikely to ease in the short term, and tight compliant sources combined with expected pullback in imports provide certain price support. Demand side, the off-season effect continued, downstream secondary aluminium enterprises remained cautiously on the sidelines, purchases were mainly small just-in-time procurement for restocking, the divergence pattern between aluminium tense scrap and wrought aluminium alloy scrap remained unchanged, order increments were limited, and vigilance is still needed against market risks arising from aluminium price fluctuations and tight supply.

Secondary aluminium alloy: Spot cargo side, yesterday ADC12 market quotations were slightly raised overall, with mainstream increases concentrated at RMB 100 per tonne. Some enterprises expanded the increase to RMB 200 per tonne, supported by cost and invoice factors. Currently, raw material costs fluctuate at highs, reverse invoicing policies are tightening, and sources with invoices are tight, providing price support. Meanwhile, market sentiment improved somewhat, and enterprises' willingness to hold prices firm strengthened. However, demand side, downstream procurement pace remained dominated by rigid demand, with limited transaction volume growth. Sustained price rises still require further demand support, and prices are expected to move sideways in the short term.

Aluminum market summary: Ex-China aluminium supply disruption risks have not yet subsided, and the ex-China aluminium ingot supply-demand gap will continue to provide support for aluminium prices. Meanwhile, tightened invoicing has restricted aluminium ingot spot liquidity, and a weakening spot market will limit upside room for domestic aluminium prices. However, since April, China's export orders have remained positive, coupled with recent macro tailwinds, a turning point in China's social inventory is expected to emerge, providing upward momentum for aluminium prices.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.