[Middle East Geopolitical Risks Cool Down, Aluminum Prices Under Pressure in the Short Term] On the macro front, Trump announced the cancellation of the originally planned military strike against Iran, as negotiations mediated by relevant countries made progress, easing market concerns over an escalation of Middle East conflicts. High inventory levels in China remain the core factor suppressing significant price rallies. Additionally, weak trading performance in the spot market further limits the upside room for aluminum prices. In the short term, aluminum prices are expected to continue the pattern of LME outperforms SHFE, fluctuating at highs.

[China Domestic Iron Ore Brief] This week, the pre-tax acceptance price for 64-grade alkaline concentrate (dry basis) at mines and beneficiation plants in Shandong was quoted at 909, up 5. Steel enterprises raised prices accordingly. Most miners maintained normal production, with a few experiencing slight inventory buildup, while most sold output as it was produced. Local steel mills currently mainly purchased as needed. Hebei steel mills had a better purchasing pace than local steel mills. Low-grade resources from small mills and traders saw relatively good transactions, and overall market transactions were moderate. However, iron ore futures showed a relatively weak trend recently.

SMM May 18 update: During the morning session, the SHFE aluminum 2606 contract fluctuated downward, with the overall price center moving significantly lower compared to the previous trading day. Today, market purchasing sentiment remained weak. Affected by the sharp decline in aluminum prices, some sellers held back from selling, with strong sentiment to hold prices firm. Mainstream spot quotes ranged from SMMA00 minus 10 yuan/mt to the average price. Today, the east China market shipment sentiment index was 2.9, down 0.1 MoM; the purchasing sentiment index was 2.83, flat MoM. Today, futures aluminum prices continued to pull back. In the central China market, buying sentiment recovered somewhat, and downstream processing enterprises showed stronger purchase willingness. However, some suppliers adopted a wait-and-see attitude, and shipment sentiment weakened. Ultimately, mainstream transaction prices in the central China market ranged from a premium of 10 yuan to a premium of 30 yuan over the central China price, with a trend of continued strengthening. Today, the central China market shipment sentiment index was 2.82, down 0.01 MoM; the purchasing sentiment index was 2.29, up 0.03 MoM. Inventory side, aluminum ingot inventory in major consumption areas rose by 12,000 mt MoM today, with inventory buildup originating from Gongyi and Wuxi.

SMM, May 18: The most-traded SHFE lead 2606 contract opened at 16,429 yuan/mt during the session. From the early to mid-session, SHFE lead prices moved sideways within the range of 16,410-16,470 yuan/mt. Near the end of the session, prices edged up, touching a high of 16,490 yuan/mt, and finally closed at 16,475 yuan/mt, posting a small bullish candlestick, down 35 yuan/mt or 0.21%. After the delivery of lead ingots, the pressure of social inventory buildup gradually eased. On the supply side, primary lead enterprise production edged up last week, while secondary lead smelting operating rates declined slightly, presenting mixed factors on the supply end. The off-season trend in downstream consumption continued, with demand remaining weak. SHFE lead prices are expected to maintain a fluctuating trend in the short term. Data source statement: Data other than public information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.

SMM May 18 News: Data Brief: As of Monday, May 18, SMM copper inventories in major regions across China decreased by 400 mt WoW to 242,900 mt, with total inventories up 103,700 mt compared to the same period last year (139,200 mt). Specifically, Shanghai saw continued inventory pullback—the only destocking region—due to the dual impact of tightening imported supply and declining domestic arrivals. Jiangsu saw overall stable domestic copper arrivals, but downstream procurement demand remained weak under the pressure of rising copper prices, resulting in a slight inventory buildup. Guangdong saw increased domestic arrivals, coupled with sluggish end-use consumption, leading to a concurrent inventory increase. Market outlook: Supply side, the pace of short-term import arrivals slowed down, while domestic arrivals saw some increase, gradually easing the overall tight supply situation. Demand side, as copper prices gradually pulled back, downstream enterprises' willingness to stockpile improved slightly, but overall market sentiment remained cautious, with most maintaining a wait-and-see purchase pace. Survey data showed that the copper cathode rod operating rate is expected to pull back to 60.84% this week, down 2.81 percentage points WoW. Considering overall supply-demand performance, the current market exhibits slightly looser supply while end-users maintain only just-in-time procurement, and social inventory is expected to show an inventory buildup trend in the short term.

[Easing China-U.S. Trade Tensions Combined with Ex-China Supply Gap — LME Outperforms SHFE in Aluminum Prices] The macro front received positive signals as China-U.S. trade negotiations yielded preliminary results. Both sides agreed to continue implementing prior tariff arrangements and to establish a Trade and Investment Council, which is expected to facilitate tariff reductions on certain products. The marginal easing of trade frictions is set to improve export expectations for aluminum semis and end-use products, providing bullish support for market sentiment. However, inventory at high levels in China remains the core factor suppressing significant price rallies. Coupled with weak spot market trading performance, this further limits the upside room for aluminum prices. In the short term, aluminum prices are expected to continue the pattern of LME outperforming SHFE, fluctuating at highs.