[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.

[SMM Aluminum Alloy Daily Review] Futures side, the most-traded aluminum alloy 2607 futures contract opened lower and rebounded with fluctuations today. It opened at 22,900 yuan/mt, then came under pressure and dipped during the session, closing at 22,895 yuan/mt before noon, down 255 yuan from the previous trading day's settlement price, a decline of 1.10%. Spot side, the ADC12 market generally declined today, with drops mostly contained within 100-200 yuan/mt. Currently, compliant aluminum scrap sources were tightening, forcing some secondary aluminum enterprises to cut production. Market supply contracted slightly, leading to rising hold-back-from-selling sentiment amid falling prices, which provided support for prices. In the short term, ADC12 prices are expected to continue moving sid

The EU-funded RecAL project aims to upgrade Europe’s aluminum recycling system by addressing alloy contamination and downcycling challenges. Led by the Austrian Institute of Technology, the initiative brings together 19 partners from nine countries to develop 14 recycling technologies and the “RecAL Hub” digital platform to improve scrap sorting, traceability and reuse efficiency. The project seeks to increase the share of high-performance recycled aluminum through smarter and more digitalised recycling processes. Aluminum beverage can recycling rates in Europe have reached 76.3%, while automotive aluminum recycling exceeds 90%, highlighting the growing importance of secondary aluminum supply chains amid rising lightweight material demand.

[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.

[SMM Cast Aluminum Alloy Morning Comment: ADC12 Generally Stable with Slight Fall amid Tug-of-War between Sellers and Buyers] Last Friday, the ADC12 market overall operated in a generally stable with slight fall manner. Some enterprises followed with slight declines driven by weakening aluminum prices, while others maintained a wait-and-see stance with stable pricing due to high costs and tight compliant supply. Supply-demand structure perspective, demand side performance remained mediocre, suppressing price rise; however, the supply side saw marginal tightening due to factors such as invoice shortages, import contraction, and phased production cuts, providing certain support for prices. Against this backdrop, ADC12 prices are expected to continue to move sideways in the short term, with relatively limited downside room.

[Macro Tailwinds and Inventory Pressure Coexist, Limiting Upside Room for Aluminum Prices] Current macro tailwinds are being released in a concentrated manner, the global rigid supply gap for aluminum has been confirmed, and China’s aluminum ingot inventory has entered initial destocking. Multiple positive factors are providing support for aluminum prices. However, inventory at high levels in China remains the core factor suppressing a sharp price surge. In addition, spot market trading has been relatively weak, and expectations for US Fed interest rate hikes this year have been heating up, further limiting upside room for aluminum prices. Going forward, attention should be paid to whether China’s aluminum ingot inventory can maintain sustained destocking, thereby easing the pressure that inventory at high levels exerts on aluminum prices.

[SMM Cast Aluminum Alloy Morning Comment: Dual Pressure from Policy and Demand, Secondary Aluminum Weekly Operating Rate Pulls Back] ADC12 prices are expected to move sideways in the short term. On the cost side, high-level support, combined with the tightening of reverse invoicing and expectations for production cuts at some enterprises, limits the downside room for prices; however, demand is unlikely to see significant improvement in the short term, and inventory remains in an accumulation cycle, which will continue to suppress upside room for prices. Going forward, key attention should be paid to the recovery of end-use consumption and the further impact of policies on the scale of production cuts on the supply side.

[SMM Aluminum Alloy Brief] The operating rate of secondary aluminum industry leaders fell 0.6 percentage points WoW to 56.4% this week. Operating rates showed mixed performance among enterprises during the week: the fading impact of the Labour Day holiday and capacity expansion by individual enterprises drove a partial rebound in operating rates, but production cuts were more widespread across the industry. Production cuts were mainly dragged by two factors: first, weakening demand. As the industry entered the off-season, orders from downstream die-casting enterprises remained sluggish, with procurement dominated by rigid demand and small batches. Second, policy tightening. The reverse invoicing policy was further tightened, making it more difficult to obtain invoiced raw materials, passiv

[SMM Analysis]Policy Intensified Supply Contraction Supporting ADC12 Price Rebound, but Weak Demand Capped Upside Potential

[Bulls Cut Open Interest, Silicon Metal Prices Weakened; Polysilicon Prices Remained Stable Overall]: Spot prices were mostly stable this week, with prices of certain silicon grades edging down slightly. As of May 14, SMM east China oxygen-blown #553 silicon was at 9,200-9,400 yuan/mt, down 50 yuan/mt WoW; #441 silicon was at 9,400-9,600 yuan/mt, flat WoW; #3303 silicon was at 10,100-10,300 yuan/mt, flat WoW. Futures market sentiment cooled. In terms of total open interest, it began to decline sharply from Tuesday as funds took profits and exited, causing futures prices to pull back. On Thursday (May 14), total open interest in silicon metal stood at 450,000 lots, down 85,000 lots or 16% from Monday. The most-traded SI2609 contract closed at 8,655 yuan/mt on Thursday, down 455 yuan/mt or 5% from Monday, as the silicon market returned to fundamentals-driven logic. Transaction side, downstream users showed strong wait-and-see sentiment amid the price fluctuations, with transactions mainly driven by rigid restocking demand.