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3.17 SMM Aluminum Morning Meeting Notes
Futures Market: Last Friday, the most-traded SHFE aluminum 2505 contract opened at 20,985 yuan/mt, hit a high of 20,990 yuan/mt, a low of 20,905 yuan/mt, and closed at 20,935 yuan/mt, down 55 yuan/mt or 0.26%. On the same day, LME aluminum opened at $2,683/mt, reached a high of $2,688.5/mt, a low of $2,678.5/mt, and closed at $2,688.5/mt, up $6.5/mt or 0.24%.
Macro: (1) The General Office of the CPC Central Committee and the General Office of the State Council issued the "Special Action Plan to Boost Consumption," which includes measures such as promoting reasonable growth in wage income, strictly implementing the paid annual leave system, stabilizing the stock market through multiple measures, studying the establishment of a childcare subsidy system, and continuously promoting the stabilization and recovery of the real estate market. (Bullish★) (2) Premier Qiang Li presided over the eighth plenary meeting of the State Council, emphasizing the need to focus on increasing policy intensity and fostering positive interaction and synergy between policy and market forces. The implementation of more proactive macro policies was highlighted to maximize policy effectiveness. (Bullish★) (3) The preliminary US consumer confidence index for March fell from 64.7 in the previous month to 57.9, marking the third consecutive monthly decline and the lowest level since November 2022. Consumers' inflation expectations for the next 5-10 years rose to 3.9%, up 0.4 percentage points from the previous month, reaching the highest level in over 30 years. The expected annual inflation rate for the next year was 4.9%, the highest since 2022. (Bearish★) (4) The US Secretary of State announced that the US will conduct bilateral negotiations with trading partners after imposing tariffs, while the US Secretary of Commerce indicated that tariffs on imported cars might be imposed as early as next month. (Bearish★)
Fundamentals: (1) According to SMM, as of last Thursday (3.6-3.13), the national operating capacity of aluminum was around 43.78 million mt/year, with an operating rate of 95.6%. Recently, aluminum production has resumed, leading to an increase in operating capacity. However, production requires time to reach full capacity, with weekly aluminum production at approximately 857,000 mt. (Bearish★) (2) SMM statistics show that as of March 17, domestic mainstream consumption areas' aluminum ingot inventory stood at 862,000 mt, down 6,000 mt WoW. (Bullish★) (3) Recently, the tug-of-war between buyers and sellers in the alumina spot market continued, with sporadic spot transactions and further slight declines in transaction prices, centering around 3,200-3,300 yuan/mt. The domestic alumina export window has closed, and the total registered warrant volume in alumina futures delivery warehouses exceeded 200,000 mt. Subsequent alumina exports and warehouse transfers are unlikely to provide sustained demand. In the short term, alumina operating capacity is expected to fluctuate, with no significant decline anticipated. As of last Friday, the total national alumina operating capacity was 88.26 million mt, with a slight surplus in the alumina fundamentals. Spot alumina prices are likely to fluctuate downward in the short term. (Bearish★) (4) According to an SMM survey, the operating rate of leading downstream aluminum processing enterprises in China continued to rebound last week, rising 0.8 percentage points WoW to 61.6%. In the short term, aluminum processing enterprises are expected to maintain a recovery trend, potentially surpassing the 62% threshold. However, the recovery in consumption has been slightly below expectations, and high aluminum prices have suppressed downstream purchase willingness, limiting the operating rate increase for some enterprises during the week. (Bullish★)
Primary Aluminum Market: Last Friday morning, SHFE aluminum briefly touched 21,000 yuan/mt before pulling back to consolidate around 20,900 yuan/mt. After the price pullback, market transactions slightly improved compared to earlier in the day but remained primarily concentrated among traders. Downstream activities were mainly focused on purchasing as needed and digesting inventory. Specifically, trading in east China was active among traders, but due to high aluminum prices, transactions were mostly around SMM A00 average price minus 10 yuan. Last Friday, SMM A00 aluminum recorded 20,910 yuan/mt, flat from the previous trading day, with a discount of 40 yuan/mt against the SHFE aluminum 2503 contract. In central China, transactions were average last Friday, with downstream enterprises holding high inventories and requiring time for destocking, leading to slower procurement. Transactions in central China were mainly around SMM Central China A00 minus 10 yuan, with SMM Central China A00 recording 20,780 yuan/mt, down 10 yuan/mt from the previous trading day. The price spread between Henan and east China was -130 yuan/mt. In the short term, destocking in mainstream consumption areas and optimistic downstream demand expectations will support aluminum prices. Combined with downstream purchasing as needed, spot premiums and discounts are expected to fluctuate.
Recycled Aluminum Raw Materials: Last Friday, primary aluminum spot prices were flat from the previous trading day, with SMM A00 spot aluminum closing at 20,910 yuan/mt. The aluminum scrap market remained stable overall, with downstream purchasing as needed. Last Friday, baled UBC aluminum scrap was quoted at 15,250-16,150 yuan/mt (excluding tax), while shredded aluminum tense scrap was quoted at 16,450-17,950 yuan/mt (excluding tax). In the short term, domestic new scrap supply has improved, but downstream demand remains weak. Coupled with high primary aluminum and aluminum scrap prices, downstream and end-use demand remain sluggish, and aluminum scrap prices are likely to fluctuate rangebound with primary aluminum.
Secondary Aluminum Alloy: Last Friday, aluminum prices hovered at highs, and secondary aluminum prices remained stable. Current demand recovery is insufficient, and the market has abundant low-priced supplies, limiting the upside room for ADC12 prices. With improved liquidity in the raw material market, procurement pressure on secondary aluminum plants has eased. If demand does not show significant improvement, ADC12 prices may face downward pressure due to cost relaxation and the impact of low-priced supplies in the market.
Summary: Macro side, US consumer confidence plunged in March, while inflation expectations surged. Domestically, the favorable macro tone remains unchanged, with the government focusing on increasing policy intensity and fostering positive interaction and synergy between policy and market forces to maximize policy effectiveness, providing bullish support for aluminum prices. Fundamentals side, the tug-of-war between alumina buyers and sellers continues, with weekly alumina operating rates declining. Alumina fundamentals remain slightly oversupplied, and spot alumina prices are likely to fluctuate downward in the short term. Domestic aluminum production resumption continues, and with weak spot prices for alumina and petroleum coke, cost-side support for aluminum continues to weaken. Aluminum ingot social inventory continued to decline during the week, and aluminum processing enterprises maintained a recovery trend in the short term. However, consumption recovery has been slightly below expectations, and high aluminum prices have suppressed downstream purchase willingness, limiting the increase in operating rates for some enterprises. Meanwhile, spot premiums and discounts in various regions are constrained. Aluminum prices are expected to hover at highs in the near term, with close attention to changes in US tariff policies and the actual release of downstream demand. Overall, the macro side presents a mix of bullish and bearish factors. Domestically, the favorable macro tone remains unchanged, while overseas trade barriers are increasing but with high uncertainty. Fundamentals side, both supply and demand are growing. As the consumption peak season approaches, most sectors are seeing increases in order volumes and operating rates, coupled with aluminum ingot social inventory destocking, providing strong support for aluminum prices. Aluminum prices are expected to fluctuate upward in the short term.
[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]
