This week, the operating rate at China's leading downstream aluminum processing enterprises came in at 63%, down 0.4 percentage points MoM. Weighed down by the deepening seasonal off-season across the sector, downstream purchase willingness was broadly subdued, and operating rates across most segments remained under pressure. Primary aluminum alloy held steady at 59.4%, as enterprises mainly focused on executing existing long-term contracts, with no release of new spot orders.

Since late April, aluminum billet processing fees in China's three major consumption regions staged a strong rebound, with South China taking the lead. Processing fees of φ120 aluminum billets (Guangdong) hit a Q2 low of -40 yuan/mt on April 16, then surged rapidly, approaching the 500 yuan/mt mark by month-end in May, and reaching a new yearly high of 490 yuan/mt on May 28. SMM believed there were three main reasons...

According to SMM statistics, on May 28, aluminum billet inventory in China's major consumption regions fell to 181,500 mt, a significant destocking of 24,000 mt WoW, successfully pulling back below the 200,000 mt threshold. Warehouse withdrawals during the week climbed to 58,900 mt, up 3,200 mt WoW, hitting a new periodic high.

This week, the operating rate of China's leading downstream aluminum processing enterprises was 64.1%, down 0.3 percentage points WoW.

[Destocking Inflection Point Largely Confirmed; Aluminum Prices Continue LME Outperforms SHFE Pattern] On the macro front, the US and Iran plan to sign a letter of intent to formally end hostilities and launch 30-day negotiations, though the trajectory of geopolitical risks remains to be seen. The US Fed meeting minutes were far more hawkish than expectations, with most policymakers supporting policy tightening, and expectations of liquidity tightening are overall bearish for metal prices. Recently, the heads of state of the US and Russia have made concentrated visits to China, which is expected to yield preliminary outcomes in trade and economic areas. On the fundamentals side, the supply gap and low inventory outside China still provide bottom support, but elevated inventory levels in China remain the core factor suppressing significant price rallies. Coupled with weak trading performance in the spot market, this further limits the upside room for aluminum prices. In the short term, aluminum prices are expected to continue the LME outperforms SHFE pattern, fluctuating at highs.

Overall, the aluminum processing industry achieved a slight edge up in operating rate this week, driven by the recovery of export orders, the surge in energy storage demand, and the recovery of infrastructure-related orders. The industry maintained relatively strong resilience, and going forward, attention should be focused on the sustainability of export orders and the boosting effect of aluminum price trends on demand.