Futures Market: Overnight, the most-traded SHFE aluminium 2507 contract opened at RMB 20,165 per tonne, with a high of RMB 20,205 per tonne, a low of RMB 20,130 per tonne, and closed at RMB 20,180 per tonne, up RMB 140 per tonne or 0.70 per cent from the previous close. LME aluminium opened at USD 2,465.5 per tonne yesterday, with a high of USD 2,488.5 per tonne, a low of USD 2,442.5 per tonne, and closed at USD 2,483 per tonne, up USD 17 per tonne or 0.69 per cent.
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Macro: (1) The EU is seeking to accelerate trade negotiations with the US, with a focus on key industries, as well as tariff and non-tariff barriers. Trump has expressed appreciation for the EU's proactive stance. (Neutral ★)
(2) Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that in the face of inflation risks posed by Trump's tariff policies, he favours temporarily maintaining stable interest rates until the impact of tariff hikes on inflation becomes clearer. He also warned against overlooking the impact of Trump's tariffs on global supply prices. (Bullish ★)
Fundamentals: (1) According to SMM statistics, as of May 27, aluminium ingot inventory in Guangdong was 223,000 tonnes; in Wuxi, it was 142,000 tonnes; and in Gongyi, it was 49,000 tonnes. The total inventory across the three locations was 414,000 tonnes, an increase of 1,000 tonnes from the previous trading day. (Bearish ★)
(2) Based on recommendations from the Technical Committee on Mining Rights and the National Mining Committee, the Minister of Mines and Geology announced a decree via national television on Monday, May 26, 2025, revoking the exploration licenses of 129 mining companies operating in Guinea. (Bullish ★)
(3) On May 27, LME aluminium inventory was recorded at 381,600 tonnes, a decrease of 3,000 tonnes or 0.78 per cent from the previous day. Over the past week, LME aluminium inventory has decreased by a cumulative 9,350.00 tonnes or 2.39 per cent. Over the past month, LME aluminium inventory has decreased by a cumulative 40,000 tonnes or 9.49 per cent. (Bullish ★)
Primary aluminium market: On Tuesday morning, the centre of the front-month SHFE aluminium contract fell significantly, briefly breaking below the RMB 20,000 per tonne threshold. In eastern China, due to recent inventory drawdowns, suppliers generally showed strong reluctance to budge on prices.
However, downstream buying interest weakened overall, and the market saw spot premiums of RMB 10 per tonne against SMM transactions, with trading gradually becoming sluggish. Subsequently, as downstream consumption continued to weaken, spot premiums will come under pressure to fall. On Tuesday, SMM A00 aluminium was reported at RMB 20,200 per tonne, down RMB 150 per tonne from the previous trading day, with a premium of RMB 90 per tonne against the 06 contract, unchanged from the previous trading day. In the central China market, suppliers initially held firm at premiums near RMB 10 per tonne against SMM transactions.
But, as shipments increased but buying interest weakened, market transactions slipped to discounts of RMB 10 per tonne to parity against SMM transactions in central China. Currently, consumption in central China is showing a weakening trend, with downstream purchasing power continuing to decline and inventory destocking slowing down. Consequently, the premium in central China will come under pressure. SMM's A00 aluminium price in central China against the SHFE aluminium 2506 contract closed at RMB 20,120 per tonne, down RMB 150 per tonne from the previous trading day. The price spread between Henan and Shanghai was RMB 80 per tonne, unchanged from the previous trading day, and the premium against the 2506 contract was RMB 10 per tonne.
Secondary aluminium raw materials: On Tuesday, the spot primary aluminium price fell by RMB 150 per tonne from the previous trading day. SMM's A00 aluminium spot price closed at RMB 20,200 per tonne, and the aluminium scrap market price followed the aluminium price decline but remained at highs overall. With the off-season in June approaching, downstream processing enterprises are experiencing weak order releases, with purchases mainly driven by immediate needs.
On Tuesday, the centralised quotes for baled UBC aluminium scrap ranged from RMB 15,150-15,750 per tonne (tax-exclusive), while the centralized quotes for shredded aluminium tense scrap ranged from RMB 15,700-17,200 per tonne (tax-exclusive price). Regionally, Shanghai, Jiangsu, Henan, Shandong, and other regions are closely linked to aluminium prices, with price adjustments ranging from RMB 100-150 per tonne. However, the overall price adjustment range still lags behind that of primary aluminium.
Regarding the price difference between A00 aluminium and aluminium scrap, in Shanghai, the price difference between A00 aluminium and mechanical casting aluminium scrap increased by RMB 13 per tonne from yesterday to RMB 1,863 per tonne. In Foshan, the price difference between A00 aluminium and aluminium extrusion scrap continued to rise by RMB 150 per tonne from yesterday to RMB 1,364 per tonne. In the short term, aluminium scrap market prices are expected to continue fluctuating at highs. The tight supply situation for aluminium tense scrap is unlikely to change, providing 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, coupled with weak demand during the off-season, will limit upside room. For downstream enterprises using aluminium scrap, the ongoing tug-of-war between cost pressure and weak terminal orders is expected to keep operating rates low. Narrowing import losses may partially alleviate supply pressure, but the transmission effect will be limited. Regional and product price differentials may further diverge. Tight supply in South China and other regions may support localised price increases, while prices in regions with weak demand will come under pressure.
Secondary aluminium alloy: On Tuesday, SMM's A00 aluminium price fell by RMB 150 per tonne from the previous trading day to RMB 20,200 per tonne, placing synchronous pressure on the secondary aluminium market. Domestic SMM ADC12 prices fell by RMB 100 per tonne to the range of RMB 20,200-20,400 per tonne, with some manufacturers temporarily stabilising their quotes due to cost pressure.
In the import market, the CIF quote for imported ADC12 continued to range from USD 2,380-2,400 per tonne, with imported instant profit and loss remaining in a state of minor loss. The tax-exclusive quote for local ADC12 in Thailand fell to 82 Thai baht/kg. Currently, the secondary aluminium alloy price maintains a pattern where it is more likely to fall than rise. Weak orders and inventory pressure are dragging prices down, but cost support limits downside room. Subsequent focus will be on the supply of upstream raw materials, the recovery of terminal orders, and the implementation of production cuts by enterprises.
Summary: On the macro front, US consumer confidence in May was significantly better than economists' expectations, leading to a further increase in the US dollar index. Fundamentals side, short-term supply shows little change; cost side, the specific impact of the Guinea incident on local bauxite supply remains to be assessed, potentially providing sentiment-driven cost support for alumina in the near term.
Demand side faces dual pressures from domestic seasonal weakness and trade uncertainties, with short-term operating rates at aluminium processing enterprises expected to remain under pressure. Subsequent focus will be on whether downstream export orders can genuinely improve and offset the anticipated weakening in domestic demand.
Overall, current low inventory provides support for aluminium prices, but recent macro conditions lack unexpected positive catalysts to further drive prices, while off-season demand-side pressures limit upside room. Short-term aluminium prices are likely to fluctuate rangebound, with attention on domestic and overseas demand performance, month-end inventory trends in May, and bauxite supply disruptions.
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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