Aluminum Industry Weekly Report: Expectations of Fed Interest Rate Cut Intensify, Indonesia's Potential Lifting of Bauxite Export Ban Impacts Market Sentiment

Macro: The growth in US non-farm payrolls fell short of expectations, while inflationary pressures also eased, prompting a more dovish stance from the Federal Reserve (Fed). Consequently, market expectations for an interest rate cut by the Fed have strengthened once again, leading to a decline in the US Dollar Index. Data released by the US Department of Labor on July 11 showed that the Consumer Price Index (CPI) in the US increased by 3.0% year-on-year in June, a narrowing of 0.3 percentage points from May, and fell by 0.1% month-on-month, indicating continued easing of inflation. Core CPI rose by 0.1% month-on-month, a narrowing of 0.1 percentage points from May, and increased by 3.3% year-on-year. Domestically, the Third Plenary Session of the 20th CPC Central Committee will be held next week, and the market eagerly awaits the release of more stimulus policies. Continued attention should be paid to policy changes and interest rate cut expectations.

Electrolytic Aluminum:
Supply: This week, domestic electrolytic aluminum operating capacity remained stable at around 43.27 million tons, with aluminum plants maintaining stable production. There was no news of large-scale shutdowns or resumptions. The market supply of aluminum ingots and other aluminum products was abundant. In terms of costs, the cost side of domestic electrolytic aluminum remained stable overall this week. The mainstream transactions in the alumina spot market did not experience significant changes. As of Thursday, the instant cost of domestic electrolytic aluminum was approximately 17,906 yuan/ton, while the instant profit was about 2,233 yuan/ton, a decrease of 240 yuan/ton from the previous Thursday. Imports were minimal, with only some long-term contracts circulating in the market, as the import window for domestic electrolytic aluminum remained closed.

Demand: On the demand side, the operating rate of domestic aluminum processing industries remained weak this week. Aluminum profile enterprises were mainly in their off-season, with orders for building materials still declining. Orders for photovoltaic frames had low processing fees, leading to insufficient willingness to accept orders. The 3C and automotive sectors did not see significant increases in terminal orders. Additionally, the Biden administration in the US imposed a new 10% tariff on steel and aluminum products transshipped through Mexico to prevent China from evading existing tariffs. This tariff took effect on Wednesday, July 10, and is expected to significantly reduce China's aluminum exports to Mexico and the US. According to customs data, China exported approximately 240,000 tons of aluminum products to the US and about 500,000 tons to Mexico in 2023.
Aluminum Processing: The continuous destocking of aluminum bar inventories for nearly a month came to an end this week, with accumulation leading domestic aluminum bar inventories back to near three-year highs. According to the latest statistics from SMM, as of July 11, domestic aluminum bar social inventories were 146,700 tons, an increase of 7,000 tons from the previous Thursday. The primary reason for the accumulation was weak demand from downstream industries during the off-season. Under this backdrop, the operating rate of aluminum profiles declined again this week, reaching 49.30%, a decrease of 1.70 percentage points from the previous week. Specifically, the construction profile sector showed increased negative sentiment, with sample enterprises in southern and eastern China reporting a significant weakening of orders. Additionally, small-batch and highly customized renovation orders discouraged small and medium-sized enterprises from accepting orders. In the industrial profile sector, while the production of photovoltaic profiles remained stable due to a slight increase in the production plan for July, the processing fees were highly competitive. Overall, the operating rate of the aluminum profile industry remained weak during the off-season.
Bauxite: Domestic bauxite prices remained stable this week, with only minor upward adjustments in Guizhou. In northern regions, there was no further news of resumed production in Shanxi and Henan, and the spot market supply of domestic bauxite remained tight, with a severe phenomenon of "high prices but no transactions." Although some domestic bauxite mines in Shanxi and Henan resumed production in May and June, they still lagged significantly behind the same period in 2023, resulting in a shortage of domestic bauxite. In southwestern regions, the spot supply of bauxite in Guizhou was slightly tight, with low-grade bauxite prices rising by 10 yuan/ton this week. In Guangxi, the supply-demand contradiction in the b

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