Discounts in the three regions widened to varying degrees from the beginning of the year to May, which was directly related to the sustained suppression of spot circulation by high inventory earlier. After entering June, as the destocking inflection point has gradually been established, premiums and discounts in the three regions have shown a divergent recovery trend...

According to SMM data, China's aluminum billet inventory in major consumption regions fell to 154,500 mt on June 11, down 8,000 mt from last Thursday and down 5,500 mt from Monday, with the destocking pace further slowing. From the perspective of warehouse withdrawals, aluminum billet withdrawals recorded 51,700 mt during June 1–8, down 4,100 mt WoW.

This week, HRC prices fluctuated downward. The weekly average price edged lower, and overall trading volume declined. Supply side, rolling line maintenance decreased this week, and overall HRC production edged up. Demand side, apparent demand for HRC weakened again this week, as the downstream sector entered the off-season, with high temperatures and rainfall constraining project starts. Speculative demand retreated, end-user wait-and-see sentiment intensified, and actual procurement volumes gradually declined. Inventory side, this week SMM’s nationwide 86-warehouse (large sample) HRC social inventory stood at 4.279 million mt, down 72,900 mt or 1.68% WoW. By region, inventory in the Northeast and South China markets built up WoW, while East China, North China, and Central China markets saw destocking WoW. Inventory destocking provided support to HRC prices. Cost side, the average iron ore price edged lower, and the sixth round of coke price increases was implemented, slightly strengthening cost support for HRC. Looking ahead, costs may continue to increase, but as the off-season effect deepens, the pace of HRC destocking may narrow. In the short term, HRC prices are expected to move sideways. Overall, the most-traded HRC contract is expected to trade in the 3,340-3,410 range next week.

SMM June 12 news: [SMM] On June 12, SMM A00 aluminum (Foshan) was reported at 24,140 yuan/mt, up 150 yuan/mt, with a premium of 20 yuan/mt over the current-month contract and a discount of 85 yuan/mt against the next-month contract (unit: yuan/mt). Today, futures continued to rise sharply, and pressure on spot aluminum in South China intensified. Inventory destocking remained strong, which would have been a support, but absolute prices and the spot-futures price spread had both cumulatively risen to relatively high levels. As the weekend approached, the urge to sell and cash in intensified again. In the morning, the stance of holding prices firm gradually loosened, with discounts widening. Mainstream quotations returned to a small discount of -10 to 0 yuan/mt, with circulating cargoes mainly at discounts. Demand side, downstream fear of high prices began to emerge, and the momentum of rushing to buy amid continuous price rises weakened, but it had not completely exited, still providing bottom support. Traders, meanwhile, sold more than they bought, only purchasing as needed, with limited replenishment. Overall trading was moderate. Spot aluminum transaction prices were concentrated at premiums of 0 to 40 yuan/mt against the SHFE aluminum 2606 contract.

SMM June 12 News: As of June 11, secondary lead finished product inventories stood at 20,400 mt, down 2,550 mt WoW from June 4. Lead prices pulled back significantly this week, prompting battery enterprises to restock on dips for rigid demand, driving inventory destocking. However, end-user new battery orders were weak, overall purchase willingness was soft, and the degree of destocking was limited. If lead prices remain weak next week, smelter production will decline further, and coupled with downstream production halts due to the Dragon Boat Festival holiday, market supply and demand will contract simultaneously. Secondary lead finished product inventories are expected to avoid a significant inventory buildup.

[Many Macro Disturbances, SHFE/LME Zinc Price Ratio Fluctuating Around 6.9]: This week, the SHFE/LME zinc price ratio fluctuated around 6.9, and the zinc ingot import window remained closed. Outside China, on the macro front, geopolitical conflicts were repeated, and the short-term escalation risk eased temporarily. The market priced in a 25 basis point rate hike this year, and LME zinc center shifted lower and then fluctuated.