Macro front, at the beginning of this week, Putin stated that companies from Russia and the US have started discussing cooperation projects. Russia plans to resume aluminum product exports to the US, with an export volume of 2 million mt, which will help stabilize the price of this product. LME aluminum pulled back significantly from its high this week. However, Trump threatened to impose a 25% tariff on goods imported from the EU. The US tariff plan may trigger inflation and escalate the global trade war. Domestically, the Chinese Academy of Social Sciences' Institute of Finance indicated that the capital and real estate markets showed signs of recovery in early 2025. Developments in China-Russia and China-US relations have drawn market attention. As March approaches, the market is focusing on the upcoming Two Sessions, which will set economic growth targets and consumption-boosting policies.
Fundamentals side, observing the cost side of the aluminum industry, the immediate full average cost of aluminum is approximately 17,038 yuan/mt, up nearly 100 yuan/mt WoW from last Thursday, with cost-side support slightly stabilizing. Demand side, after aluminum prices adjusted from their highs this week, restocking demand from end-users was somewhat stimulated, and downstream operating rates continued their mild post-holiday recovery. Operating rates of leading aluminum extrusion enterprises remained high, and the industrial extrusion sector maintained robust performance. However, downstream aluminum consumption showed a differentiated recovery this week, requiring continued attention to whether end-use consumption can sustain momentum after entering March. On the inventory side, SMM statistics showed that domestic aluminum ingot social inventory recorded 873,000 mt, with an inventory buildup of 28,000 mt WoW from last Thursday. Notably, mid-week saw the first post-holiday destocking of domestic aluminum billets, and the pace of domestic aluminum ingot inventory buildup slowed significantly. On the eve of March, domestic aluminum inventory overall has shown a relatively strong performance.
In summary, Russia's plan to resume aluminum product exports to the US will help narrow the price spread between domestic and overseas markets. The US's inconsistent stance on tariffs has left the market in uncertainty, with Trump's tariff threats fueling inflation concerns. Interest rate cut expectations remain unpredictable. As March approaches, the domestic market is focusing on the upcoming Two Sessions, which will set economic growth targets and consumption-boosting policies. Fundamentals side, cost-side support has slightly stabilized, and downstream operating rates are continuing their mild post-holiday recovery ahead of the "Golden March and Silver April" period. Continued attention is needed to determine whether end-use consumption can sustain momentum after entering March. Currently, most suppliers are bullish on the aluminum market outlook, and it is expected that the inventory turning point will gradually emerge in March. With policy support, aluminum ingot inventory is expected to remain low in the long term, and east China has already started destocking. Sentiment in the spot market has turned towards holding back cargoes. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum remains more likely to rise than fall. The possibility of tariffs and other issues continuing to ferment, along with macroeconomic stimulus exceeding demand expectations, could push aluminum prices to challenge 21,000 yuan/mt. The most-traded SHFE aluminum 2504 contract is expected to trade between 20,600-21,300 yuan/mt next week, while LME aluminum is expected to trade between $2,600-2,750/mt.
