Inventory buildup weighed on domestic aluminium prices, ex-China support and risks coexisted

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The most-traded SHFE aluminium 2606 contract closed at RMB 24,380 per tonne, down 0.16 per cent. The price was below MA5 (24,473.00), MA10 (24,628.00), MA30 (24,723.33), and MA60 (24,518.25), with short- and medium-term moving averages all forming resistance and the price breaking below all moving average supports. The MACD indicator DIF (-54.8633) was below DEA (29.5256), with the histogram in negative territory (-168.7777), indicating continued release of bearish momentum. The suggested core trading range for SHFE aluminium is 23,800-24,800. LME aluminium 3M closed at USD 3,503.5 per tonne, up 0.04 per cent, moving sideways. The price was below MA5 (3,521.40), MA10 (3,519.55), and MA30 (3,514.08), but remained above MA60 (3,377.78), with short-term moving averages forming resistance while long-term support remained intact. The MACD indicator DIF (20.6646) was below DEA (37.2709), with the histogram in negative territory (-33.2127), indicating continued exhaustion of upward momentum. The suggested core trading range for LME aluminium is USD 3,450-3,550 per tonne.

Macro front: Iran delivered its response to the US plan to end the war via Pakistan. Current negotiations focused on ceasing hostile actions in the region. US President Trump said he did not like Iran's response and found it completely unacceptable. Iranian insiders stated that the only plan the negotiating team should formulate is one that safeguards Iran's national rights. If Trump was dissatisfied with it, that would actually be a better outcome. A Qatari LNG carrier successfully passed through the Strait of Hormuz and entered the Gulf of Oman. This was reportedly the first Qatari LNG carrier to transit the Strait of Hormuz in approximately 70 days since the US and Israel launched military operations against Iran.

Fundamentals: China's aluminium processing composite PMI registered 53.9 per cent in April. Although it remained above the 50 mark, it pulled back notably from the March high, indicating that industry prosperity shifted from rapid recovery to mild expansion, with peak-season momentum weakening marginally and structural divergence gradually emerging. Last Friday, the SHFE aluminium 2605 contract fluctuated downward in the morning session, with the overall price centre rising from the previous trading day. Invoicing constraints currently constrained market trade shipments. Downstream buyers maintained a strong wait-and-see sentiment, with purchase willingness remaining at a relatively weak level. Dragged down by lacklustre spot buying, mainstream transactions were concentrated around SMMA00 aluminium minus RMB 10 per tonne to the average price. Last Friday, the east China market shipment sentiment index was 2.74, up 0.08 W-o-W; the procurement sentiment index was 2.66, up 0.06 W-o-W. Inventory side, on Monday, aluminium ingot inventory in China's major consumption areas was 1.44 million tonnes, destocking by 1,000 tonnes W-o-W from last Friday.

Primary aluminium market: Last Friday, the SHFE aluminium 2605 contract fluctuated downward in the morning session, with the overall price centre rising from the previous trading day. Last Friday, invoicing constraints led to a contraction in trader shipments. Last Friday, downstream buyers showed a strong wait-and-see sentiment, and purchase willingness remained at a relatively weak level. Dragged down by lacklustre spot buying, mainstream transactions centred around SMMA00 aluminium minus RMB 10 per tonne to the average price. Last Friday, the east China market shipment sentiment index was 2.74, up 0.08 W-o-W; the purchase sentiment index was 2.66, up 0.06 W-o-W. Last Friday, SHFE aluminium prices saw a slight correction. In the central China market, the sentiment of accepting price increases but not decreases was evident. Overall buying sentiment recovered slightly compared to last Thursday, but some suppliers held prices firm and held back from selling, and due to invoice shortages, shipment enthusiasm was low, with the trading atmosphere remaining sluggish. Ultimately, the actual transaction price range in the central China market hovered between parity with the central China price and a premium of RMB 10 above the central China price, with relatively small fluctuations. Last Friday, the central China market shipment sentiment index was 2.81, down 0.01 W-o-W; the purchase sentiment index was 2.28, up 0.01 W-o-W.

Aluminium scrap: Last Friday, A00 aluminium prices rebounded RMB 170 per tonne from the previous trading day, and aluminium scrap market prices generally followed with increases of RMB 100-200 per tonne. The mainstream price range for shredded aluminium tense scrap (priced based on aluminium content) hovered around RMB 20,500-21,000 per tonne (tax exclusive). The price range for imported zorba (Ningbo Port) was RMB 21,670-21,970 per tonne (tax inclusive). Price spread side, on May 8, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint in Foshan was recorded at RMB 2,570 per tonne, and the price difference between A00 aluminium and shredded aluminium tense scrap was RMB 1,925 per tonne. Supply side, the aluminium scrap collection and shipment pace after the holiday remained generally stable compared to April, 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 has set in, the operating rate of secondary aluminium producers pulled back slightly, aluminium tense scrap purchasing was on an as-needed basis with low inventory operations, and wrought aluminium alloy scrap was supported by secondary aluminium plate/sheet and strip operating rates but with limited strength. Downstream demand was primarily rigid, with strong wait-and-see sentiment. The aluminium scrap market is expected to remain in the doldrums at high levels next week, with the mainstream price range for 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 supply coupled with an expected pullback in imports will provide some price support. Demand side, the off-season effect continues, downstream secondary aluminium enterprises remain cautiously on the sidelines, purchasing mainly through small rigid-demand restocking orders. The divergence between aluminium tense scrap and wrought aluminium alloy scrap remains unchanged, order growth is limited, and vigilance is still needed against market risks arising from aluminium price fluctuations and tight supply.

Secondary aluminium alloy: Spot cargo side, last Friday the ADC12 market was stable with a slight recovery. Some enterprises raised quotes slightly by RMB 100 per tonne, driven by the aluminium price rebound and rising raw material costs, but most enterprises maintained a cautious wait-and-see attitude. On one hand, the cost side provides certain support for prices, and suppliers' sentiment to hold prices firm has strengthened; on the other hand, downstream demand remains mediocre, and the market remains cautious in accepting high-priced supplies. Against the backdrop of insufficient demand support, enterprises generally adopt a wait-and-see approach with stable pricing and flexible adjustments, and ADC12 prices are expected to continue moving sideways in the short term.

Aluminium 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, the continuation of higher-than-expected inventory buildup in China will weigh on domestic aluminium prices. At the same time, tightened invoicing restricts aluminium ingot spot liquidity, and the weakening spot market further limits upside room for domestic aluminium prices. Key attention should be paid to the potential turning point in China's social inventory, which could drive an aluminium price rebound.

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.