3.5 SMM Morning Meeting Minutes
Futures: In the night session on March 5, the most-traded SHFE aluminum 2604 contract opened at 24,640 yuan/mt, hit an intraday high of 24,830 yuan/mt and a low of 24,280 yuan/mt, and finally closed at 24,435 yuan/mt, down 380 yuan/mt from the previous close, a decline of 1.53%. From a technical perspective, the 5/10/20-day moving averages were in a bullish alignment, with MA5 (24,483) > MA10 (24,083) > MA20 (23,893). In terms of open interest, night-session open interest was 237,000 lots, down 14,889 lots from the daytime session. LME aluminum opened at $3,320/mt, reached a high of $3,400.5/mt and a low of $3,269/mt, and closed at $3,292.5/mt, down 1.29%. Trading volume was 52,923 lots, down 5,356 lots, while open interest was 669,000 lots, up 1,523 lots.
Macro front: 2026 Government Work Report: economic growth of 4.5%–5%, with efforts in actual work to strive for better results; surveyed urban unemployment rate of around 5.5%, with more than 12 million new urban jobs; an increase in the consumer price index of around 2%, etc. (Bullish ★) Amir Heydari, deputy commander of Iran’s Khatam al-Anbiya Central Headquarters, said in an interview on the morning of the 5th local time that Iran had not actually closed the Strait of Hormuz. In a statement, the Islamic Revolutionary Guard Corps said that military and commercial vessels belonging to the US, Israel, and European countries and their supporters were strictly prohibited from transiting the waters, and would be struck if discovered. (Neutral)
Fundamentals: This week, the weekly operating rate of leading domestic downstream aluminum processing enterprises rebounded 2.5 percentage points MoM to 59.5%. Overall, post-holiday resumption progressed steadily, but amid high aluminum prices and uneven demand recovery, performance diverged significantly across segments. SMM expected that in the short term, industry operating rates would gradually recover along with downstream restarts, but the dampening effect of high aluminum prices on consumption should not be underestimated. Overall, the market showed a differentiated recovery and a fluctuate upward trend. Going forward, close attention should be paid to the pace of end-user restarts, inventory drawdowns, and order releases.
Primary aluminum market: In early trading, SHFE aluminum 2602 fluctuated upward, with the price center higher than the previous trading day. Affected by the US-Iran conflict, aluminum prices continued to rise. Yesterday, impacted by high aluminum prices, buying sentiment weakened while selling sentiment strengthened. The spot-futures price spread was currently relatively favorable, and some traders were still making purchases for hedging. Bullish sentiment was strong, and sellers held prices firm. Yesterday, mainstream transactions were at the average price to 10 yuan/mt. Yesterday, the east China market shipments sentiment index was 2.98, up 0.3 MoM; the buying sentiment index was 2.96, down 0.23 MoM. Geopolitical conflicts affected shipments from Aluminum Bahrain, intensifying sentiment around financial constraints. Traders in the central China market remained bullish. Although downstream processing enterprises were constrained by weaker-than-expected orders and inventories not yet fully depleted, resulting in relatively weak purchasing sentiment, traders’ purchases boosted overall market trading, and premiums remained relatively firm. Ultimately, actual transaction prices in the central China market ranged from a premium of 10 yuan/mt over the central China price to a discount of 30 yuan/mt to the central China price, with mainstream transaction prices concentrated at a discount of 10-20 yuan/mt to the central China price. Yesterday, the central China market shipment sentiment index was 2.77, up 0.07 MoM; the purchasing sentiment index was 2.4, up 0.08 MoM.
Aluminum scrap: The US-Iran conflict continued to disrupt aluminum fundamentals, triggering urgent risk-off sentiment. Yesterday, spot primary aluminum rose 730 yuan/mt MoM from the previous trading day, and the aluminum scrap market actively followed the increase. In terms of the price difference between A00 aluminum and aluminum scrap, on March 5, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,688 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,881 yuan/mt. After the Lantern Festival, domestic aluminum scrap yards and downstream scrap utilization enterprises had basically fully resumed a normal production pace, but end-use demand recovered slowly, and actual raw material restocking fell short of expectations. It is expected that next week the aluminum scrap market will hold up well at elevated levels, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) running around 20,300-20,900 yuan/mt (tax excluded). After the holiday, production order has gradually recovered, and the release of supply has further eased, but downstream processing enterprises’ order recovery has been slow. Overall trading is expected to remain sluggish, and the supply-demand tug-of-war is set to intensify in the short term. Close attention should be paid to the impact of the US-Iran conflict on primary aluminum supply and transportation, downstream production resumptions, and changes in recycling policies, and vigilance is needed against intensifying price volatility risks.
Secondary aluminum alloy: Futures: Yesterday, the most-traded 2604 aluminum alloy contract opened higher in the morning session and fluctuated upward, touching an intraday high of 23,975 yuan/mt before noon; it then retreated after rapid rise in the afternoon, with a rapid plunge late in the session to a low of 23,290 yuan/mt, and finally closed at 23,420 yuan/mt, down 1.06% on the day. Trading volume increased, while open interest changed slightly. Futures showed a rise-then-fall pattern, with a clear late-session withdrawal of funds and intensified short-term volatility. Yesterday, the secondary aluminum alloy market extended its gains, with producers generally raising quotes by 300-600 yuan/mt, and SMM ADC12 prices rising to the 24,700-24,900 yuan/mt range. Cost support was significant. Affected by elevated raw material prices and losses on earlier low-priced orders, enterprises’ willingness to raise prices strengthened markedly; even with limited downstream acceptance, they still proactively increased prices in line with the market. Currently, high prices are clearly suppressing downstream purchasing, with replenishment mainly limited to small lots for rigid demand, and overall trading is relatively sluggish. In the short term, ADC12 prices are expected to maintain a hold-up-well pattern: on the one hand, tensions in the Middle East have put aluminum capacity in Qatar, Bahrain, Mozambique, and other locations at risk of shutdowns, with overseas supply disruptions reinforcing bullish sentiment; on the other hand, domestic resume production has been slow, supply release has fallen short of expectations, and together with strong cost support, downside room for prices is limited. Subsequent market attention will shift to the actual realization of end-use demand: if downstream orders are released significantly and primary aluminum prices remain strong, the price center of ADC12 is expected to move further higher; if the demand recovery is insufficient, the market will most likely enter a rangebound consolidation phase.
Aluminum Market Summary:From a macro perspective, domestic conditions were improving; overseas, geopolitical conflicts in the Middle East escalated, risk-off sentiment strengthened, the US dollar index rose, and there remains considerable uncertainty around the US Fed’s interest rate cut plans. However, as the direction of the Middle East situation is still unclear, uncertainty around the production and transportation of aluminum-related products increased. From a fundamentals perspective, on the supply side, newly commissioned aluminum projects in China, Indonesia, and Angola continued ramping up, but with the escalation of Middle East geopolitical conflicts, production or shipments at some aluminum smelters have already been affected, and daily average production is expected to decline. On the demand side, after the holiday, as downstream players gradually resumed operations, demand recovered; the downstream weekly operating rate rose a further 2.5 percentage points, and the weekly proportion of liquid aluminum rebounded by about 8 percentage points MoM. On inventories, demand is still in the recovery stage; casting ingot output in March is expected to remain high, and with some volumes not yet warehoused as well as some finished product inventories at aluminum smelters not yet shipped to social warehouses, the inventory buildup trend in China’s social inventory of aluminum ingot is set to continue in the short term, with the post-holiday peak still expected to reach 1.35-1.4 million mt. Overall, although domestic social inventory continues to build, the Middle East geopolitical situation is currently a global focus; if the conflict persists, expectations for global aluminum supply tightens will be strong, and aluminum prices have solid upward momentum. In the short term, aluminum prices are expected to hold up well.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]
