[Overseas Macro Bullishness Battles Supply Bearishness, China's Destocking Supports SHFE Aluminum Bottom] On the domestic front, bullish factors are prominent. The proportion of liquid aluminum has continued to rise. Over the past week, aluminum ingot warehouse withdrawals hit a four-year high, and the pace of inventory destocking has accelerated significantly, forming support for the bottom of SHFE aluminum. Amid the interplay of bullish and bearish factors, overseas, the bullish impact of the US dollar and the bearish forces from supply and geopolitics offset each other. After its earlier excessive decline, LME aluminum's downward momentum has slowed, and in the short term, it is mainly consolidating at lows for repair; domestically, supported by rapid destocking, the probability of underperforming LME aluminum is low. The SHFE and LME markets may show slight divergence, and a sustained unilateral weak trend is unlikely.

[SMM Cast Aluminum Alloy Morning Comment: Aluminum Alloy Futures Rebound Continuously; Spot Cargo Transactions Dominated by Rigid Demand] Recently, ADC12 prices outside China continued to decline, with quotes today pulling further back to the $3,100-3,200/mt range. Meanwhile, China's ADC12 prices remained relatively firm, supported by aluminum scrap costs, driving a continuous recovery in the price spread between Chinese and overseas markets and further narrowing import losses. Currently, the import loss per mt of ADC12 is about 1,087 yuan, having pulled back to early-March levels.

SMM News, July 3: Today, SMM A00 spot aluminum prices closed at 22,760 yuan/mt, up 220 yuan/mt from the previous trading day, and aluminum scrap prices largely followed suit. The supply side remained tight as supervision over the "reverse invoicing" policy continued to tighten. Production cuts and shutdowns spread among small and medium-sized scrap utilization enterprises in Anhui, Jiangxi, Hubei and other regions, and Shandong also heard news of suspending reverse invoicing from July, further increasing the scarcity of compliant invoiced aluminum scrap. Regarding price spreads, on July 2, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 1,931 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 623 yuan/mt. Notably, under the dual pressure of rapidly declining aluminum prices and tight invoice availability, the price spread for aluminum tense scrap narrowed sharply. Some cast aluminum alloy enterprises have begun using A00 aluminum ingots as a substitute for aluminum scrap as raw material. On the import side, besides low port arrivals in June-August due to the 1-3 month shipping lag, the UAE's four-month temporary export ban on aluminum scrap starting in June and the EU's proposed 15% tariff from September have significantly strengthened expectations of shrinking overseas high-quality scrap supply, and the import supply chain will suffer substantial damage. The aluminum scrap market is expected to continue to consolidate at low levels, but the downside room for prices is limited. The mainstream range of shredded aluminum tense scrap prices based on aluminum content is projected at 19,200-19,800 yuan/mt (tax excluded). Supply side, the constraints from the reverse invoicing policy are unlikely to reverse in the short term, and the tight supply of compliant invoiced cargo will persist. Import side, multiple headwinds will gradually materialize in the form of depressed actual port arrivals in the coming months, and the supply of imported aluminum scrap will weaken further. Demand side, amid the deepening off-season, downstream operating rates remain low, end-user orders are unlikely to see substantial improvement, and scrap utilization enterprises will likely continue their strategy of purchasing as needed and maintaining low inventories. The price spread between aluminum scrap and primary aluminum has narrowed to a historical low, significantly eroding the economic advantage of scrap over primary aluminum. If aluminum prices continue to fall, the substitution effect will accelerate and become more evident.

[SMM Aluminum Alloy Express] Recently, ADC12 prices in overseas markets continued their downward trend, with quotes pulling back further to the range of $3,100-$3,200/mt today. Meanwhile, domestic ADC12 prices remained relatively firm supported by aluminum scrap costs, driving a continued recovery in the price spread between Chinese and overseas markets and further narrowing import losses. Currently, the import loss per mt of ADC12 stands at about 1,087 yuan, pulling back to the level seen in early March. If domestic prices stay high going forward while overseas markets remain under pressure and decline, the degree of price inversion between Chinese and overseas markets is expected to narrow further, potentially opening the window for import profits gradually.

[ADC12 Price Daily Review: Futures and Spot Prices Strengthen in Tandem, but Demand Concerns Linger; Weakening Prices Outside China Drive Continued Recovery of the Domestic-Overseas Spread] Today, quoted prices in the ADC12 market generally extended their upward trend. The SMM ADC12 price rose 200 yuan/mt from the previous day to 24,000 yuan/mt.

[Weekly Review of Aluminum Scrap and Secondary Aluminum]Primary-Scrap Spread Narrows Sharply as ADC12-A00 Premium Hits a Record High: Has the Window Opened for Primary Aluminum to Replace Scrap?