Futures Market: On the previous trading day's night session, the most-traded SHFE aluminium 2507 contract opened at RMB 20,650 per tonne, with a high of RMB 20,650 per tonne, a low of RMB 20,590 per tonne, and closed at RMB 20,645 per tonne, down RMB 35 per tonne or 0.17 per cent from the previous close. On the previous trading day, LME aluminium opened at USD 2,549 per tonne, with a high of USD 2,560.5 per tonne, a low of USD 2,537.5 per tonne and closed at USD 2,546.5 per tonne, up USD 1.5 per tonne or 0.06 per cent.
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Macro: (1) The US Fed maintained the benchmark interest rate unchanged at 4.25 per cent- 4.50 per cent, the fourth time it has kept rates steady since January. The Fed's dot plot indicates that it expects to cut interest rates twice in 2025 and 25 basis points each in 2026 and 2027. (Bearish ★)
(2) The Bank of England is set to announce its interest rate decision on Thursday, with expectations that it will keep rates unchanged at 4.25 per cent, while hinting at a strategy of cutting rates once every other meeting. (Bearish ★)
Fundamentals: (1) According to SMM statistics, on June 18, aluminium ingot inventory in Guangdong was 160,500 tonnes; in Wuxi, it was 114,000 tonnes; and in Gongyi, it was 51,000 tonne, totalling 325,500 tonnes across the three locations, a decrease of 6,000 tonnes from the previous trading day. On June 18, regarding the inventory of aluminium billet in two domestic locations, Guangdong had 56,800 tonnes and Wuxi had 19,800 tonnes, totalling 76,600 tonnes, a MoM decrease of 1,400 tonnes. (Bullish ★)
(2) According to SMM, small and medium-sized aluminium wire and cable enterprises in Hebei reported being in a semi-shutdown state, with the industry's operating rate weakening and market consumption momentum insufficient. This weak performance is mainly attributed to two factors: First, the State Grid has just gone through a concentrated delivery cycle, and although enterprises have sufficient orders on hand, new orders have not yet been matched in a timely manner.
Second, the current spot aluminium prices are at a high level, while the bid prices of enterprises in the early stage are significantly lower than the current prices, severely compressing profit margins. As a result, enterprises have low willingness to purchase raw materials and lack the motivation to produce finished product inventories. (Bearish ★)
Primary Aluminium Market: On Wednesday, the SHFE aluminium futures market fluctuated upward in the morning session, with a significant upward trend. However, the actual transaction premiums in the spot market narrowed. Due to the arrival of the traditional off-season, downstream enterprises were hesitant to purchase at high prices, and trading activity was far from ideal.
In east China, the market initially offered goods at the SMM average price. As the futures market surged, the spot premiums against the futures market narrowed and gradually shifted to offering at SMM-10. Traders reported that trading activity weakened today, with poor purchase willingness from downstream enterprises, and most transactions were executed under long-term contracts.
On Wednesday, SMM A00 aluminium was reported at RMB 20,900 per tonne, up RMB 280 per tonne from the previous trading day, with a premium of RMB 190 per tonne against the 07 contract, down RMB 20 per tonne from the previous trading day. In the central China market, suppliers once again offered significant discounts in the morning session, with the spot market trading at a discount of RMB 30-20 per tonne to SMM's central China price. Buyers exhibited a strong fear of high prices, resulting in sluggish transactions. The price spread with east China widened.
On Wednesday, SMM's central China A00 aluminium price against the SHFE aluminium 2507 contract closed at RMB 20,260 per tonne, up RMB 260 per tonne from the previous trading day. The price spread between Henan and Shanghai was RMB 150 per tonne, widening by RMB 20 per tonne from the previous trading day, and it was trading at a premium of RMB 40 per tonne against the 2507 contract.
Secondary Aluminium Raw Materials: On Wednesday, the spot primary aluminium price surged by RMB 280 per tonne from the previous trading day, with SMM A00 aluminium closing at RMB 20,900 per tonne. The aluminium scrap market struggled to catch up with the price increase. As the off-season in June progressed past the halfway mark, downstream scrap utilisation enterprises faced weak order releases, with procurement mainly driven by immediate needs.
On Wednesday, the quoted prices for baled UBC aluminium scrap were concentrated in the range of RMB 15,400-15,900 per tonne (tax-excluded), while shredded aluminium tense scrap prices were concentrated in the range of RMB 16,000-17,500 per tonne (tax-excluded). Regionally, aluminium prices in Shanghai, Jiangsu, Shandong and other regions were closely linked, with price adjustments ranging from RMB 200-250 per tonne.
In Jiangxi, Hubei, Henan, Foshan and other regions, price adjustments lagged behind aluminium prices, with adjustments ranging from RMB 100-150 per tonne. By product, baled UBC aluminium scrap prices continued to rise by RMB 50 per tonne on Wednesday, while shredded aluminium tense scrap prices increased by RMB 100 per tonne from the previous day.
Prices for wheel hubs removed from vehicle and scrap motorcycle wheel rose by RMB 100-200 per tonne from the previous day. Regarding the price difference between A00 aluminium and aluminium scrap, in Shanghai, the price spread between A00 aluminium and mechanical casting aluminium scrap widened by RMB 8 per tonne to RMB 1,858 per tonne from the previous day.
In Foshan, the price difference between A00 aluminium and mixed aluminium extrusion scrap free of paint increased by RMB 211 per tonne to RMB 1,718 per tonne from the previous day. Considering the actual difficulty in selling, aluminium scrap suppliers adopted a cautious wait-and-see attitude when adjusting prices amid rising aluminium prices. It is expected that the aluminium scrap market will continue to fluctuate at highs. The tight supply situation for aluminium tense scrap is unlikely to change, with solid price support.
Wrought aluminium alloy scrap will continue to fluctuate rangebound with primary aluminium, but the risk of a high-level correction in primary aluminium, combined with weak demand during the off-season, may suppress upside room.
The operating rate of downstream secondary aluminium enterprises may remain low, with a difficult balance between costs and orders. Additionally, after the listing of cast aluminium alloy futures, arbitrage activities may temporarily boost market activity, potentially increasing the price sensitivity of aluminium scrap, a core raw material. Caution is advised against short-term volatility risks.
Secondary Aluminium Alloy: On Wednesday, the SMM A00 aluminium price surged by RMB 280 per tonne from the previous trading day to RMB 20,900 per tonne. Domestic SMM ADC12 prices rose by RMB 100 per tonne to the range of RMB 20,000-20,300 per tonne. Driven by the strong upward momentum of aluminium prices, secondary aluminium raw material prices actively followed suit, but the increase was weaker than that of primary aluminium, with an overall increase in the range of RMB 100-200 per tonne.
Although the continuous rise in cost side provided upward momentum for ADC12 prices, the actual increase was limited, with the market rising by a maximum of RMB 100 per tonne. Currently in the traditional off-season for the industry, new orders are growing weakly, and persistent weak demand on the demand side is suppressing the upside room for ADC12 prices. However, the cost support logic still exists, and it is expected that ADC12 prices will maintain narrow adjustments in the short term.
Summary: On the macro front, the US Fed maintained interest rates unchanged as expected. Fed Chairman Powell stated at a press conference that the price increases triggered by tariffs would become more pronounced in the coming months, and the Fed would need to be confident that inflation was declining before initiating an interest rate cut.
On the fundamentals side, domestic operating capacity of electrolytic aluminium remained stable, with a decrease in casting ingot volume contributing to the continued destocking of domestic aluminium ingot inventory.
On the cost side, there were expectations of weakening prices for alumina and auxiliary materials, leading to diminished cost support for electrolytic aluminium.
On the demand side, there was dual pressure from domestic seasonal weakness and trade uncertainties, which would cause the operating rate of aluminium processing enterprises to decline under pressure in the short term.
Overall, the current low inventory and expectations of a higher proportion of liquid aluminium provide strong support for aluminium prices. However, the off-season pressure on the demand side limits upside room, and spot aluminium ingots in major consumption areas may soon face a situation of weak supply and demand. In the short term, aluminium prices are expected to fluctuate at highs.
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.
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