Recently, Shanghai Aluminum has shown a weak rebound trend, with the main contract reaching a phase high of 20,750 yuan per ton. Although the low domestic aluminum inventory provides support for aluminum prices, the characteristics of the off-season for downstream consumption are becoming increasingly prominent. Therefore, it is expected that the upward space for Shanghai aluminum in the future market will be limited.
Domestic electrolytic aluminum production remains at a high level
According to SMM statistics, the cumulative domestic output of electrolytic aluminum from January to June was 21.6948 million tons, representing a year-on-year growth of 2.42%. In June, domestic electrolytic aluminum output was 3.609 million tons, up 1.57% year-on-year but down 3.23% month-on-month. By the end of June, the domestic electrolytic aluminum production capacity had been approximately 45.69 million tons, and the operational capacity was about 43.83 million tons. At the end of June, the second phase of the electrolytic aluminum replacement project between Shandong and Yunnan began. This time, it is required that the original factory reduce its replacement capacity and pass the acceptance inspection before restarting the new plant. Due to the impact of capacity replacement, the industry's operating rate slightly declined month-on-month in June. In June, the proportion of molten aluminum in the domestic electrolysis industry rose by 0.1% month-on-month to 75.8%. The increase was less than expected at the beginning of the month, mainly due to the high inventory of alloying in the downstream and the increase in ingots in some aluminum plants. It is expected that the proportion of molten aluminum will decline in July. Based on the ratio of aluminum to water, the domestic output of electrolytic aluminum ingots in June decreased by 12.77% year-on-year to approximately 872,500 tons.
Entering July, the domestic electrolytic aluminum operating capacity has been at a high level. The second batch of replacement projects in Yunnan have been put into operation, and the industry's operating rate has rebounded. There has been no movement on other projects for the time being. In terms of the proportion of molten aluminum, the terminal demand has weakened significantly. The inventory of intermediate aluminum alloy products has accumulated significantly. News of production cuts has come from places like Qinghai and Central Plains, forcing upstream electrolytic aluminum plants to increase the number of ingots. The proportion of molten aluminum may fall back to around 74%. In the later stage, it is still necessary to pay attention to the changing trend of the aluminum water ratio in electrolytic aluminum and the inventory and demand situation of alloyed products.
In terms of electrolytic aluminum imports, since 2020, China's primary aluminum imports have maintained a strong growth momentum, achieving a transformation into an importer of aluminum ingots. In 2024, China's cumulative imports of electrolytic aluminum reached 2.136 million tons, accounting for approximately 4.63% of the total domestic supply. Entering 2025, although China's imports of primary aluminium in the first three months were lower than the same period last year, they still remained at a high level in the past five years. In April, the import volume of primary aluminium increased both year-on-year and month-on-month. According to data from the General Administration of Customs, China's primary aluminum imports in May were 223,200 tons, a decrease of 10.9% month-on-month and an increase of 41.4% year-on-year. From January to May, the cumulative total domestic imports of primary aluminium were approximately 1.0575 million tons, a year-on-year decrease of 3.7%. In May, the main sources of domestic primary aluminum imports were the Russian Federation, Indonesia, India, Malaysia, Australia, Iran and other countries and regions. Among them, the total amount of primary aluminum imported from Russia in May was approximately 208,300 tons, an increase of 12.44% compared with the previous month, accounting for 93.3% of the total imports in May. Since November last year, the proportion of primary aluminium imported by China from Russia has risen rapidly. The reason why Russia has become the top source of domestic primary aluminum imports is mainly due to the sanctions imposed by Europe and the United States on Rusal, which have deepened the structural contradiction in global aluminum ingot supply. Against the backdrop of geopolitical conflicts, cooperation between China and Russia in the economic and trade fields is becoming increasingly close, and Russian metals may enter China on a regular basis. Indonesia is the second-largest supplier. In May, it imported 7,930 tons of primary aluminium from Indonesia, a decrease of 16.51% month-on-month and 59.88% year-on-year, accounting for 3.55% of the total imports in May.
At present, the loss of overseas primary aluminum imports is about 1,000 yuan per ton. Driven by weak overseas demand and continuous domestic inventory reduction, overseas supplies are flowing to China. However, due to the domestic off-season and relatively high aluminum prices, the purchasing enthusiasm is low. Some imported supplies are at a significant discount in the spot market and have few transactions.
In May this year, China's export volume of electrolytic aluminum was approximately 3.2 tons, up 376.4% year-on-year and 136.9% month-on-month. The total export volume of primary aluminium from January to May was 67,000 tons, representing a year-on-year increase of 215.6%. In May, the net domestic import of primary aluminium was 190,700 tons, a decrease of 19.5% compared with the previous month and an increase of 26.3% year-on-year. From January to May, the cumulative net domestic import of primary aluminium was approximately 990,500 tons, a decrease of 8% year-on-year.
In May this year, China's imports of unrolled aluminum and aluminum products reached 350,000 tons, up 14.7% year-on-year. From January to May, China's imports of unrolled aluminum and aluminum products were 1.67 million tons, a year-on-year decrease of 6.9%. In May this year, China exported 550,000 tons of unrolled aluminum and aluminum products, a year-on-year decrease of 3.1%. From January to May, the cumulative export volume was 2.43 million tons, a year-on-year decrease of 5.1%. In recent years, due to the increasing number of anti-dumping investigation cases against China's aluminum materials in regions such as the European Union and Vietnam, as well as the growing uncertainty of tariffs, the export scale of China's aluminum profiles has not yet returned to the level before the sharp decline in 2016.
The domestic electrolytic aluminum industry is experiencing a process of inventory accumulation
Domestic aluminum ingots continued the previous trend of inventory reduction in the first half of June. By the end of June, the overall domestic supply of aluminum ingots had increased. Meanwhile, during the off-season for consumption, the high aluminum prices had a restraining effect on consumption, which led to a weakening of the inventory release volume and thus ushered in a process of inventory accumulation. As of July 7th, domestic aluminum ingot inventories stood at 478,000 tons, an increase of 10,000 tons compared to a week ago, a decrease of 41,000 tons compared to the beginning of June, and a decline of 313,000 tons compared to the same period last year.
The cost of electrolytic aluminum has risen and profits have expanded
Since June, driven by the decline in the prices of alumina and electricity, the cost of electrolytic aluminum has dropped somewhat. The average cost of the electrolytic aluminum industry in June was 17,076.84 yuan per ton, an increase of 310 yuan per ton compared with May. As of July 7th, the immediate cost of domestic electrolytic aluminum was approximately 16,477.84 yuan per ton, a decrease of 743.29 yuan per ton compared to the beginning of June and a reduction of 1,428.84 yuan per ton compared to the same period last year. Since June, while the cost of electrolytic aluminum has dropped, the spot price center of electrolytic aluminum has shifted upward, which has continuously expanded the profit margin of the electrolytic aluminum industry. The average profit of the electrolytic aluminum industry in June was 3,456.66 yuan per ton, an increase of 97.22 yuan per ton compared with May, demonstrating good profit resilience. As of July 7th, the immediate profit of domestic electrolytic aluminum was 4,162.16 yuan per ton, an increase of 1,263.29 yuan per ton compared with the beginning of June and 1,838.84 yuan per ton compared with the same period last year. From the perspective of later cost changes, for aluminum fluoride: The support for the price of aluminum fluoride from both supply and demand sides is weak, and it is difficult for the price to rise in the short term. Pre-baked anode: It is expected that the price center of petroleum coke will shift downward in July, making it difficult to provide effective support for the price of pre-baked anodes. Therefore, the price of pre-baked anodes is expected to decline in July. Electricity: There is room for the grid electricity price to be reduced during the wet season.
The off-season atmosphere is thick, and the aluminum processing industry is generally under pressure
In June, all the sub-sectors of the aluminum processing industry were under general pressure. The composite PMI index for the aluminum processing industry in June was 40.1%, falling below the boom-bust line. It decreased by 9.7% month-on-month and 1.5% year-on-year. Mainly due to the weak performance of terminal demand during the off-season for consumption, the growth of new orders has been rather sluggish. Therefore, most enterprises have adopted a production cut strategy.
Since the beginning of this year, while the new round of trade-in policy has been intensified and implemented ahead of schedule, the technological upgrading and product renewal of enterprises have also stimulated the demand in the auto market, jointly promoting the steady growth of auto production and sales. From January to May this year, the cumulative production and sales of automobiles in China reached 12.826 million and 12.748 million units respectively, increasing by 12.7% and 10.9% year-on-year. In May, the auto market continued to maintain a good development momentum, with production and sales increasing by more than 10% year-on-year. Both domestic demand and exports performed well. In May, China's auto production and sales reached 2.649 million and 2.686 million units respectively. Compared with the previous month, they increased by 1.1% and 3.7% respectively, and compared with the same period last year, they increased by 11.6% and 11.2% respectively. In May, the inventory warning index for auto dealers was 52.7%, a year-on-year decrease of 5.5% and a month-on-month decrease of 7.1%. The inventory warning index was above the boom-bust line, indicating an improvement in the prosperity of the auto circulation industry.
From the perspective of policy support, in order to continue to fully and effectively leverage the policy promotion effect of "trade-in for new", on January 17, 2025, the Ministry of Commerce and seven other departments issued a notice on the work of trade-in for new vehicles in 2025. The policy clearly defined the upper limit of the national subsidy standard and the holding time standard of the old vehicle. Compared with the "Two new" policies in 2024, the policies in 2025 will offer more subsidy funds, greater intensity, broader scope and better mechanisms. It is expected that the policies will be more effective and powerful. According to the preliminary estimate of the China Automobile Dealers Association, by 2025, more than 5 million passenger vehicles will enjoy subsidies for scrapping and renewal, and over 10 million passenger vehicles will enjoy subsidies for replacement and renewal. At the same time, the previous government work report clearly stated that efforts should be made to accelerate the filling of domestic demand, especially the consumption gap, making domestic demand the main driving force and stable anchor for economic growth. In the later period, as the combined effects of relevant policies continue to be released, the stable and positive trend of the automotive industry is expected to be consolidated. The China Association of Automobile Manufacturers predicts that China's total auto sales will reach 32.9 million units in 2025, representing a year-on-year growth of 4.7%.
Shanghai aluminum is expected to fluctuate at a high level
In terms of fundamentals, the operating rate of domestic electrolytic aluminum enterprises will remain at a relatively high level in the later period. However, the ceiling of domestic electrolytic aluminum production capacity has been formed, and the supply is rigid, with relatively limited growth space. At the consumer end, the off-season atmosphere in various downstream sectors of aluminum is relatively strong, and new orders are rather weak. Meanwhile, the high aluminum prices have also to some extent curbed the increase in the operating rate. Last week, the national profile operating rate was 49.5%, a 0.5% drop from the previous week. As the off-season for consumption deepens, the situation of aluminum consumption is unlikely to improve in the later period. Overall, the relatively low domestic aluminum inventory provides some support for aluminum prices. However, considering the uncertainties in the macro environment and the pressure from weak downstream demand and other factors, it is expected that the upward space for Shanghai aluminum in the later period will be limited. It is expected that Shanghai Aluminum will mainly experience high-level fluctuations in the near future. The upper resistance level for the main contract is 20,880 yuan per ton, and the lower support level is 20,380 yuan per ton.
