[Aluminum Morning Meeting Summary: Macro Tailwinds and Inventory Buildup Clash, Aluminum Prices Move Sideways Awaiting Consumption Guidance] Recently on the macro front, global trade tensions have continued to ease, and domestic industrial profits have shown ongoing recovery, especially with significant improvement in high-tech manufacturing profits, supporting expectations for aluminium semis demand; overseas interest rate cut expectations are also favourable for risk asset preferences. The demand side remains the core focus of the market going forward, with some companies already starting to stockpile for the upcoming peak season orders. Domestic downstream operating rates for aluminium have slightly rebounded, but as aluminium prices recover, terminal shipments have declined again, and procurement volumes of spot aluminium by processing enterprises have noticeably decreased. In terms of inventory, social inventory at major consumption sites for aluminium ingot was recorded at 466,500 tonnes on Wednesday, up 3,000 tonnes M-o-M. With no sign of an inventory turning point and continued buildup, futures have strengthened, and A00 aluminium absolute prices remain high, leading to weak downstream procurement sentiment and pressure on spot premiums. Overall, consumption resilience persists against a backdrop of low inventory, and macro sentiment recovery along with industry policy expectations are the main drivers for aluminium prices. It is expected that aluminium prices will continue to move sideways at high levels this week, with close attention to the strength of subsequent consumption fulfilment and overseas monetary policy trends.
8.28 SMM Aluminum Morning Meeting Summary
Futures: The most-traded SHFE aluminium 2510 contract opened at RMB 20,735 per tonne during the night session, with a highest price of RMB 20,745 per tonne, a lowest price of RMB 20,660 per tonne, and closed at RMB 20,680 per tonne. Trading volume was 7.5 lots, and open interest was 252,000 lots. LME opened at RMB 2,603 per tonne, with a highest price of RMB 2,604.5 per tonne, a lowest price of RMB 2,599.5 per tonne, and closed at RMB 2,603.5 per tonne.
Macro: (1) Data from the China Council for the Promotion of International Trade showed that the global trade friction index in June was 92, at a medium-high level. Due to factors such as the US extending the suspension of reciprocal tariffs, global trade frictions continued to ease, with the amount involved in global trade friction measures down 14.7 per cent Y-o-Y and 13.7 per cent M-o-M. (Bullish ★) (2) NBS data showed that in July, profits of industrial enterprises above designated size fell 1.5 per cent YoY, narrowing by 2.8 percentage points from June, marking two consecutive months of narrowing. High-tech manufacturing profits turned from a 0.9 per cent decline in June to an 18.9 per cent increase, boosting the profit growth rate of all industrial enterprises above designated size by 2.9 percentage points, playing a leading role. (Bullish ★) (3) John Williams, President of the New York Fed, stated that it would be appropriate to lower interest rates at the right time. He maintained a moderately restrictive stance on policy, noting that if the neutral rate is 1 per cent or slightly lower, the current position is in the restrictive zone. He also expressed considerable optimism about the economic situation. (Bullish ★)
Fundamentals: (1) According to SMM statistics, on August 27, aluminium ingot inventory in Guangdong was 191,500 tonnes; in Wuxi, 189,500 tonnes; in Gongyi, 85,500 tonnes. The total inventory across the three locations was 466,500 tonne, up 3,000 tonnes from the previous period. (Bearish ★) (2) SMM statistics also showed that domestic aluminium billet inventories in two regions were 61,500 tonnes in Guangdong and 31,500 tonnes in Wuxi, totalling 93,000 tonnes, down 500 tonnes from the previous period. (Bullish ★)
Primary Aluminum Market: During the first trading session of the morning, the front-month SHFE aluminium contract mainly fluctuated, with the price centre still hovering around RMB 20,880 per tonne. In the second trading session, the price centre shifted to around RMB 20,850 per tonne, with the absolute price higher than the previous trading day. In east China, the futures absolute price strengthened, and suppliers were eager to sell, but downstream purchasing sentiment was poor, and the actual transactions were mainly at a discount of RMB 20 per tonne against the SMM average price, with some deals at a discount of RMB 10 per tonne and RMB 30 per tonne. The selling sentiment index in the east China market was 2.79, down 0.09 M-o-M; the buying sentiment index was 2.32, down 0.13 M-o-M. Yesterday, SMM A00 aluminium was reported at RMB 20,840 per tonne, up by RMB 60 per tonne from the previous trading day, trading at a discount of RMB 20 per tonne against the September contract, down by RMB 20 per tonne from the previous trading day. In the central China market, due to the high absolute price of aluminium, downstream enterprises remained quiet, with weak buying sentiment. However, the high absolute price stimulated the seller's willingness to ship goods. In terms of demand, there was only a small amount of hedging buying in the market, with actual transactions trading at a discount of RMB 20-30 per tonne against the SMM central China aluminium price. Yesterday, the shipping sentiment index in the central China market was 2.44, down by 0.03 M-o-M; the purchasing sentiment index was 2.11, down by 0.04 M-o-M. SMM central China A00 aluminium closed at RMB 20,660 per tonne against the SHFE aluminium 2509 contract, up by RMB 40 per tonne from the previous trading day, trading at a discount of RMB 200 per tonne against the September contract, down by RMB 40 per tonne.
Recycled aluminium raw materials: Yesterday, the spot primary aluminium price rose by RMB 60 per tonne from the previous trading day, with SMM A00 spot aluminium closing at RMB 20,840 per tonne, and the overall aluminium scrap market prices following the rise. As the traditional peak season approaches, orders for some downstream scrap utilization enterprises have recovered, yet the tight supply in the aluminium scrap market remains the main theme, with procurement prices remaining high. Yesterday, the concentrated quotation for baled UBC aluminium scrap ranged from RMB 15,600-16,100 per tonne (tax excluded), while the concentrated quotation for shredded aluminium tense scrap (priced based on aluminium content) ranged from RMB 17,300-17,800 per tonne (tax-excluded price). Baled UBC rose by RMB 50 per tonne M-o-M, while shredded aluminium tense scrap (priced based on aluminium content) and wheel hubs (for both cars and motorcycles) remained unchanged M-o-M. In Jiangxi and Anhui, the prices of aluminium tense scrap remained stable temporarily yesterday, while in Hubei, all aluminium scrap prices rose by RMB 100 per tonne yesterday. It is expected that the aluminium scrap market prices will continue to fluctuate at highs this week. The tight supply of shredded aluminium tense scrap (priced based on aluminium content) is expected to intensify, with prices likely to fluctuate within the range of RMB 17,100-17,600 per tonne (tax excluded); baled UBC, supported by downstream can stock consumption and other scrap utilization enterprises, is expected to fluctuate within the range of RMB 15,500-16,000 per tonne (tax excluded).
Secondary aluminium alloy: On the futures market, the most-traded cast aluminium alloy 2511 contract opened at RMB 20,320 per tonne yesterday, reaching a high of RMB 20,325 per tonne and a low of RMB 20,260 per tonne, before closing at RMB 20,265 per tonne, down by RMB 65 per tonne or 0.32 per cent from the previous trading day. The open interest stood at 8,128 lots, with a trading volume of 1,557 lots, as bulls mainly reduced their positions during the day. In the spot market, the SMM A00 aluminium price remained stable at RMB 20,780 per tonne from the previous day, while the SMM ADC12 price held steady at RMB 20,550 per tonne. Currently, the supply of aluminium scrap remains tight, providing strong support for secondary aluminium alloy prices. Additionally, recent news of tax refund cancellations and tax supplements in multiple regions has fuelled enterprises' enthusiasm for raising prices to cope with cost pressures, making prices more likely to rise than fall in the short term. In terms of demand, as the traditional "September peak season" approaches, downstream purchasing sentiment has mildly recovered, but the strength of the recovery remains insufficient. In the short term, the price of ADC12 is expected to maintain a fluctuating upward trend, with cost support and policy disruptions jointly driving prices higher. However, insufficient demand may constrain the upside room. If policy impacts deepen or peak-season demand is released as expected, prices may break through the current range. Conversely, if policy implementation remains mild and demand continues to be weak, prices may continue to consolidate at high levels. Subsequent focus should be placed on the progress of policy document implementation, the recovery of aluminium scrap supply, and the marginal improvement in end-use demand.
Summary: On the recent macro front, global economic and trade frictions have continued to ease, while domestic industrial enterprise profits have continued to recover, particularly with significant improvements in high-tech manufacturing profits, providing support for aluminium semis demand expectations. Overseas interest rate cut expectations have also been favourable for risk asset preferences. Demand remains the core focus for the market going forward, with some enterprises already beginning to stockpile inventory in anticipation of improved orders during the subsequent peak season. Domestic aluminium downstream operating rates have rebounded slightly, but as aluminium prices have rebounded, terminal shipments have declined again, and procurement volumes of spot aluminium semis by processing enterprises have significantly decreased. In terms of inventory, the social inventory of aluminium ingots in mainstream consumption areas recorded 466,500 tonnes on Wednesday, up 3,000 tonnes M-o-M. The inventory inflection point has not yet been reached, with inventory build-up continuing. Futures have strengthened, and the absolute price of A00 aluminium remains high, resulting in weak downstream procurement sentiment and pressure on spot premiums. Overall, consumption resilience persists against a backdrop of low inventory, with macro sentiment recovery and industrial policy expectations serving as the primary drivers for aluminium prices. It is anticipated that aluminium prices will predominantly move sideways within a high range this week, with a focus on the subsequent strength of consumption realization and overseas monetary policy developments.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should exercise caution in decision-making and not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to Shanghai Metals Market.]
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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