Middle East tensions have sparked a massive steel trade "mismatch." Iran's blocked exports created a 2.3-million-ton billet vacuum in Southeast Asia, while the Red Sea crisis stalled China's flat steel shipments to the Gulf. Consequently, China and India are rapidly absorbing SEA's diverted billet orders. SMM projects that blocked flat steel returning to China's domestic market, combined with surging overseas billet demand, will accelerate the narrowing of the domestic HRC-rebar spread.

[SMM Cast Aluminum Alloy Morning Comment: Overnight Aluminum Futures Closed Lower, Spot Cargo Under Short-Term Pressure] On Wednesday, the ADC12 market generally showed a downward trend, with mainstream producers broadly lowering quotes by 100 yuan/mt. This price adjustment was mainly driven by the pullback in aluminum prices, which weakened cost support. Enterprises accordingly adjusted their quotes in line with market changes, but the overall magnitude of the adjustment remained relatively restrained, indicating a rather cautious market sentiment.

[SMM Cast Aluminum Alloy Morning Comment: Futures Prices Retreated After a Rapid Rise, and Market Divergence Intensified at High Levels] Overnight, the aluminum alloy 2604 contract opened higher and then fluctuated downward, opening at 23,770 yuan/mt, rising to 23,820 yuan/mt during the session, and then pulling back under pressure to a low of 23,525 yuan/mt before closing at 23,645 yuan/mt late in the session, down 80 yuan/mt from the previous settlement price, a decline of 0.34. Open interest edged up by 6 lots to 5,304 lots, with trading volume at 2,417 lots. Wait-and-see sentiment remained strong among market participants, and market divergence intensified at high levels.

[Geopolitical Tensions Combined With Deferred Interest Rate Cut Expectations Leave SHFE Aluminum Under Short-Term Pressure but Fluctuating at Highs] Against the backdrop of continued tightening LME liquidity, LME aluminum still has upward momentum, with strong support from prices outside China, and is expected to maintain a backwardation structure in the short term. China remains in a phase of high inventory coupled with weak fundamentals, and its upward momentum is significantly weaker than that outside China. Amid divergent domestic and external drivers, the SHFE/LME price ratio is expected to continue weakening, and aluminum prices are still expected to fluctuate at highs in the short term.

[SHFE/LME Price Ratio Pulled Back and Fluctuated Around 7.3]: This week, the SHFE/LME price ratio pulled back and fluctuated around 7.3, and the zinc ingot import window remained closed. Outside China, easing inflation concerns boosted a rebound in zinc prices; subsequently, investors stayed cautious about an escalation of the Middle East conflict, while a stronger US dollar, together with US February CPI coming in line with expectations and still-sticky inflation, drove LME zinc to fluctuate lower.

[Operating Rates of Galvanising Producers Continued to Increase]: This week, the operating rate of the galvanizing industry was 53, up 13.94 percentage points WoW. Raw material side, zinc prices fluctuated this week, and zinc ingots previously price-fixed by galvanising enterprises arrived one after another, leading to a slight increase in zinc ingot inventory at galvanising enterprises.