Apr 7 SMM Morning Meeting Summary
Futures: Last Friday, SHFE aluminum closed at 24,660 yuan/mt, down slightly by 0.24%. The price was below MA5 (24,728), but still above MA10 (24,234), MA30 (24,435.33), and MA60 (24,304.5). Short-term moving averages exerted some pressure, while support from medium-term moving averages remained. On the MACD indicator, DIF (70.33) and DEA (39.35) maintained a golden cross above the zero axis, with the histogram remaining positive (61.96), indicating that bullish momentum was still present but had weakened somewhat. The core trading range for SHFE aluminum is expected at 24,400-24,900. LME aluminum closed at $3,491.5/mt, up 0.75%. The price remained above all moving averages, with MA5 (3,473.1) and MA10 (3,361.75) showing a standard bullish alignment, and the upward trend remained intact. On the MACD indicator, DIF (59.24) and DEA (45.38) formed an upward golden cross, with the histogram positive (27.72), indicating continued upward momentum. The core trading range for LME aluminum is expected at 3,470-3,530.
Macro front: The US, Iran, and a group of regional mediators were discussing a possible 45-day ceasefire agreement that could permanently end the conflict involving Iran. Sources said the likelihood of reaching a partial agreement within the next 48 hours was extremely slim. A senior Iranian government official said the latest ceasefire proposal put forward by mediator Pakistan had been received and was currently under review. (Neutral★)
Fundamentals: Supply side, the Middle East conflict hit core capacity, while the proportion of liquid aluminum in China rebounded sharply. Supply outside China was directly impacted by geopolitical conflict, with aluminum enterprises in the Middle East cutting production. Recently, UAE's EGA and Bahrain's Alba were hit by missile attacks in succession, damaging production facilities. The extent of the damage was still being fully assessed, and the market generally expected large-scale production cuts or even shutdowns, widening expectations for a global aluminum supply gap and further intensifying concerns over supply outside China. In China, the proportion of liquid aluminum rebounded in March as downstream operations fully resumed after the holiday, rising sharply by 9.3 percentage points MoM to 73.7%, above expectations at the beginning of the month. Entering April, the traditional peak consumption season, downstream operating rates continued to rise, and the proportion of liquid aluminum is expected to climb further. On the inventory side, high aluminum prices in China suppressed downstream willingness to restock proactively. Downstream enterprises generally purchased as needed based on orders and maintained low-inventory operations, with no large-scale stockpiling for now. Last Thursday, China's social inventory of aluminum ingot posted a slight inventory buildup of 14,000 mt from last Monday, and short-term inventory remained at a relatively ample level. Inventories outside China continued to decline, with LME aluminum inventory maintaining a downward trend this week and falling to 414,000 mt.
Primary Aluminum Market: In early trading, SHFE aluminum 2604 fluctuated upward, while the price center moved lower than the previous day. Affected by downstream pre-holiday restocking, buying sentiment surged sharply last Friday, prompting sellers to raise offers. Market transactions were mainly concentrated around the average discount to SMM A00 aluminum to a premium of 20 yuan/mt. Last Friday, the east China market shipment sentiment index was 3.34, down 0.09 MoM; the purchasing sentiment index was 3.55, up 0.54 MoM. In the central China market, downstream restocking sentiment was strong, with purchasing sentiment exceeding shipment sentiment, prompting sellers to raise offers and driving market quotations and transaction prices higher throughout the day. Ultimately, actual transaction prices in the central China market were around a premium of 30-40 yuan/mt over the central China price. Last Friday, the central China market shipment sentiment index was 2.7, down 0.09 MoM; the purchasing sentiment index was 2.49, up 0.06 MoM.
Aluminum Scrap:Last Friday, spot primary aluminum fell 120 yuan/mt from the previous trading day, and the aluminum scrap market generally followed lower in a pullback. Last Friday, the tightening regulatory trend under the "reverse invoicing" policy remained unchanged, while compliance costs in the aluminum scrap recycling segment stayed elevated, and the actual supply of invoice-backed and available cargo remained tight. Demand side, the traditional peak consumption season of "Golden March and Silver April" underperformed expectations, and downstream scrap utilization enterprises such as secondary alloy producers mostly maintained purchasing as needed and low inventory operations; high prices, coupled with continued wild swings in aluminum prices, kept suppressing procurement enthusiasm among scrap utilization enterprises, and overall market transactions remained sluggish, with the pattern of underperforming in peak season continuing. In terms of the price difference between A00 aluminum and aluminum scrap, as of April 3, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,155 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap in Foshan was 1,865 yuan/mt. The aluminum scrap market is expected to fluctuate upward at highs this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) running around 20,800-21,300 yuan/mt (excluding tax). Supply side, regulatory policies such as "reverse invoicing" are unlikely to see any substantive easing in the short term, and tight compliant supply, together with continued sentiment among yard operators to hold back cargoes and hold back from selling, will continue to provide bottom support for prices. Demand side, the recovery in peak season fell short of expectations, end-user orders lacked momentum for recovery, and the pattern of just-in-time procurement is expected to continue. In the short term, close attention should be paid to the actual impact of the Middle East geopolitical conflict on global aluminum smelter capacity, downstream end-user orders, and the implementation progress of the reverse invoicing policy, while staying alert to the risk of sharp fluctuations in aluminum prices at highs.
Secondary Aluminum Alloy:In futures, before noon last Friday, the most-traded aluminum alloy 2605 contract showed a pullback amid fluctuations, with both trading volume and open interest declining. After opening, the price climbed to 23,715 yuan/mt, then fluctuated downward, hitting a low of 23,320 yuan/mt. By the midday close, it was quoted at 23,600 yuan/mt, down 90 yuan/mt, or 0.38%, from the previous trading day. The market continued its high-level correction in the morning session. In the short term, attention should be paid to support in the 23,500-23,600 yuan/mt range; if this level is breached, further downside may open up. Spot side, the ADC12 market continued to fluctuate downward last Friday. Affected by the widening decline in aluminum prices, market sentiment turned cautious, and most enterprises lowered their quotations; a few enterprises remained temporarily stable and stayed on the sidelines under cost support. As the Qingming Festival approaches, downstream stocking demand fell short of expectations, with procurement still mainly driven by rigid demand, and transaction performance showed no obvious improvement. Coupled with market expectations of weakening demand in April, ADC12 prices still face some downward pressure in the short term, and the market remains in the doldrums.
Aluminum Market Summary:Macro front, although discussions on a ceasefire agreement between the US and Iran are underway, the likelihood of reaching one in the short term is extremely slim, and the disturbance from geopolitical conflict has yet to be removed. Supply side, aluminum capacity in the Middle East has come under direct military attack, with UAE's EGA and Bahrain's Alba successively attacked and production facilities damaged. Expectations for the global aluminum supply gap have expanded significantly, and concerns over supply outside China continue to intensify. Meanwhile, China has entered the traditional peak consumption season, with the proportion of liquid aluminum rebounding sharply to 73.7, downstream operating rates rising steadily, and solid support from the demand side. Overall, expectations of substantive supply contraction triggered by attacks on Middle Eastern aluminum plants, together with low global inventory and recovering demand during China's peak season, will provide strong upward momentum for aluminum prices. In the short term, aluminum prices are expected to break out of the trading range and 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 their own independent judgment. Any decisions made by clients are unrelated to SMM.]
