Geopolitical uncertainties persist, domestic and international aluminium prices diverge in volatile trading

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Futures: The most-traded SHFE aluminium 2607 contract closed at RMB 24,775 per tonne, up 0.79 per cent. 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 aluminium is 24,350-25,000.

The LME aluminium 3M contract closed at USD 3,760.50 per tonne, up 0.75 per cent, 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 aluminium 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 ship-owners 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, aluminium, 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 per cent to 15 per cent, and the threshold for local content ratio of steel, aluminium, and copper in imported products was lowered from 95 per cent to 85 per cent.

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 tonnes at the beginning of the month to 338,000 tonnes at month-end, a decrease of approximately 25,000 tonnes for the full month, with inventory levels at historically extremely low levels. Inventory side, aluminium ingot inventory in major consumption areas rose 0.6 W-o-W yesterday, with the inventory buildup mainly from Wuxi and Gongyi.

Primary aluminium market: SHFE aluminium 2506 contract fluctuated upward in early trading, with the overall price centre moving higher compared to the previous trading day. Affected by rising aluminium 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 RMB 10 per tonne to the average price. Yesterday, the east China market selling sentiment index was 3.01, up 0.07 W-o-W; the purchasing sentiment index was 2.83, down 0.08 W-o-W. Entering the June off-season, downstream processing enterprises in central China saw weak orders.

Combined with rising aluminium prices, purchase willingness was low. However, suppliers tended to sell in large volumes when aluminium 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 RMB 190-210 per tonne against SHFE aluminium 06 contract. Yesterday, the central China market selling sentiment index was 2.88, up 0.03 W-o-W; the purchasing sentiment index was 2.18, down 0.01 W-o-W.

Aluminium scrap: Yesterday, SMM A00 price rose RMB 140 per tonne compared to the previous trading day, and the aluminium scrap market followed the uptrend overall. Supply side, the tightening regulatory stance on the "reverse invoicing" policy continued, with compliance costs in the aluminium scrap recycling process remaining elevated.

Available invoiced sources were tight, and the core support for aluminium scrap prices was invoice scarcity rather than actual demand boost. Meanwhile, affected by the persistently inverted price spread between domestic and ex-China aluminium 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 utilisation enterprises operated at low rates, and end-user orders lacked follow-through. Scrap utilisation 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 aluminium tense scrap (priced based on aluminium content) mainstream range maintained at RMB 20,300-20,900 per tonne (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 aluminium 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 utilisation enterprises were concerning, and incremental end-use demand was limited.

Secondary aluminium alloy: Spot side: ADC12 prices overall held up well yesterday, with most enterprises raising quotes by RMB 100 per tonne, and some enterprises subsequently following futures to increase by another RMB 100-200 per tonne. Current market contradictions remained concentrated on the raw material side. Under the backdrop of tightening invoice regulation, compliant aluminium 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 localised 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, aluminium scrap circulation conditions, and downstream purchase pace.

Aluminium market summary: If the US-Iran ceasefire agreement materialises, 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 aluminium prices.

Rigid supply gaps ex-China support a stronger LME aluminium, while China's inventory destocking has begun to emerge but remains weak in magnitude, limiting SHFE aluminium'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 aluminium capacity operations.

In the short term, aluminium prices will maintain a pattern of LME outperforms SHFE while moving sideways.

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.