3.17 SMM Morning Meeting Summary
Futures: In the night session on March 16, the SHFE aluminum 2605 contract opened at 24,975 yuan/mt, hit an intraday high of 25,080 yuan/mt and a low of 24,865 yuan/mt, and finally closed at 24,970 yuan/mt, down 200 yuan/mt from the previous close, or 0.79%. Technical analysis showed the MA lines remained in a medium-term bullish alignment, with SMA5 (25,072.37) < SMA10 (25,096.13) > SMA20 (24,940.47) > SMA40 (24,645.71) > SMA60 (24,433.41). The medium and long-term moving averages were still diverging upward, indicating a bullish medium-term trend, but the 5-day moving average had fallen below the 10-day moving average, suggesting some weakening in short-term bullish momentum. On the 4-hour candlestick chart, MACD showed a green bar (DIFF: 241.81, DEA: 281.61, STICK: -79.61), with the DIFF line crossing below the DEA line to form a death cross, indicating fading short-term bullish momentum and pullback pressure on prices. In terms of open interest, night-session open interest was about 312,000 lots, an increase of 1,876 lots from the previous session, showing characteristics of increased short positions by bears. On March 16, LME aluminum opened at $3,456.0/mt, reached a high of $3,494.5/mt, a low of $3,372.0/mt, and closed at $3,392.0/mt, down 1.37% from the previous day. Trading volume was 32,347 lots, down 1,245 lots, while open interest was 683,000 lots, up 2,861 lots.
Macro Front: From March 15 to 16 local time, China and the US held economic and trade consultations in Paris, France. Li Chenggang said the topics discussed included bilateral tariff levels under the new situation, as well as a possible further extension of arrangements related to bilateral tariffs and relevant non-tariff measures. The US side briefed on adjustments to its latest tariff measures and its next-step considerations, while the Chinese side expressed concern over the resulting uncertainty. Both sides agreed to work jointly to maintain the stability of bilateral economic and trade relations and discussed a plan to establish a working mechanism to promote bilateral trade and investment cooperation. (Bullish ★) According to CME FedWatch, the probability of the US Fed cutting interest rate by 25 basis points by this week was 0.9%, while the probability of keeping rates unchanged was 99.1%. By April, the probability of a cumulative 25-basis-point interest rate cut was 3%, the probability of keeping rates unchanged was 97%, and the probability of a cumulative 50-basis-point cut was 0%. By June, the probability of a cumulative 25-basis-point cut was 21.9%. (Bearish ★)
Fundamentals: Inventory side, on Monday aluminum ingot inventory in major consumption regions increased by 18,500 mt MoM, with all three regions posting inventory buildup. In the short term, aluminum ingot continued its post-Chinese New Year seasonal inventory buildup. Affected by bullish sentiment, premiums are expected to remain on a narrowing trend. According to South32's official website on March 16, it confirmed that Mozal Aluminium (Mozal) entered maintenance status on March 15. Mozal's annual capacity is about 580,000 mt. South32's CEO said that over the past six years, extensive discussions had been held with the Mozambican government, Eskom, and other stakeholders, but they failed to secure sufficient and affordable power supply for Mozal beyond March.
Primary Aluminum Market: The SHFE aluminum 04 contract opened higher yesterday and rallied initially, while market trading was relatively sluggish. Futures prices later fell, while buying sentiment improved and price acceptance rose, pushing transaction prices higher. Yesterday's mainstream quotations and transaction prices were mostly concentrated between a discount of 10 yuan/mt and the average price. Yesterday, the east China market's shipping sentiment index was 3.07, down 0.26 WoW; the purchasing sentiment index was 2.66, up 0.11 WoW. Yesterday, aluminum prices continued to edge lower from last Friday, and with inventory remaining high, traders in the central China market showed limited bullish sentiment. Overall purchase volumes recovered somewhat from the previous two trading days. As futures prices moved lower, market premiums showed a continued upward trend. In the end, actual transaction prices in the central China market were mostly concentrated between a discount of 10 yuan/mt to the central China price and a premium of 20 yuan/mt to the central China price, and moved higher throughout the session. Yesterday, the central China market's shipping sentiment index was 2.58, down 0.09 WoW; the purchasing sentiment index was 2.36, up 0.01 WoW.
Secondary Aluminum Raw Material: Ongoing fluctuations in geopolitical risks drove spot primary aluminum down 330 yuan/mt yesterday from the previous trading day, and the aluminum scrap market fell across the board in tandem. In terms of the price difference between A00 aluminum and aluminum scrap, as of March 16, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,475 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,561 yuan/mt. Although it is now the traditional peak season, domestic aluminum scrap yards and downstream scrap utilization enterprises maintained a lukewarm production pace, as the recovery in end-user orders fell short of expectations and prices saw wild swings, with actual raw material restocking also weaker than expected. On the policy front, secondary aluminum enterprises lacked clear expectations for the specific implementation rules of "reverse invoicing," and the circulation of aluminum scrap will tighten further. The aluminum scrap market is expected to maintain high-level, strong fluctuations this week, with the mainstream price range for shredded aluminum tense scrap (priced based on aluminum content) hovering around 20,400-21,000 yuan/mt (ex-tax). Primary aluminum will still be the core driver under the influence of the geopolitical situation, and the risk of price fluctuations is intensifying. Supply side, cargo availability is being released steadily, but policy uncertainty continues to suppress circulation efficiency. Demand side, the recovery pace in the peak season remains relatively slow, and high prices and wild swings continue to restrain purchase willingness. In the short term, close attention should be paid to primary aluminum trends amid developments in geopolitical conflicts, the recovery of downstream orders, and the implementation of secondary recycling policies, while guarding against the risk of a sharp pullback from high levels.
Secondary Aluminum Alloy: On the futures side, yesterday the most-traded aluminum alloy 2604 contract opened at 23,655 yuan/mt, then quickly moved lower and touched an intraday low of 23,550 yuan/mt. Prices then gradually stabilized and rebounded, repeatedly fluctuating and consolidating around the average price line, with a relatively intense tug-of-war between longs and shorts. Before midday, prices held up well, gradually recouping the morning losses and rising to an intraday high of 23,910 yuan/mt, close to moving into positive territory. As of the midday close, the latest price was 23,790 yuan, up 135 yuan from the previous trading day's settlement, or 0.57%. Spot side, quoted prices in the secondary aluminum alloy market overall fell by 100 yuan/mt yesterday. Affected by the pullback in futures, most enterprises lowered their quotes accordingly to align more closely with actual market transactions. However, as aluminum scrap raw material prices remained at a relatively high level, the cost side provided some support to ADC12 prices, and enterprises were generally restrained in the extent of their price adjustments. Demand side, downstream procurement still mainly focused on rigid demand, and no concentrated restocking driven by the price pullback has emerged so far. Wait-and-see sentiment in the market has picked up somewhat, while overall trading performance remained relatively stable. In the short term, raw material costs remain high, providing strong support to ADC12 prices. But if prices continue to rise, the restraining effect of high prices on end-use demand will also gradually become apparent. Meanwhile, as the operating rate of secondary aluminum enterprises gradually recovers, supply is expected to increase mildly. Overall, ADC12 prices are expected to continue to fluctuate at highs in the short term. Going forward, close attention should be paid to the pace of downstream order release, the potential pressure brought by the supply recovery process, and the impact of changes in the Middle East situation on aluminum price trends.
Aluminum Market Summary:Overall, macro geopolitical risks in the global aluminum market have yet to subside. The situation in the Middle East remains in stalemate, threats to navigation through the Strait of Hormuz have not been lifted, and aluminum enterprises in the region face disruption in both raw material imports and product exports. The stability of the global aluminum supply chain remains under pressure, and the risk premium continues to persist. Fundamentally, operating aluminum capacity outside China has declined somewhat. Affected by energy, logistics, and geopolitical factors in Europe, the Middle East, and other regions, some capacity has entered cycles of production cuts or shutdowns, reinforcing expectations of a contraction on the global supply side. In China, aluminum has maintained stable operations, and overall supply remains steady. After the holiday, demand in China has entered a gradual recovery phase, with the share of direct supply of liquid aluminum and the operating rate of downstream processing enterprises steadily rebounding MoM. The demand structure shows divergence between stronger and weaker segments: demand from PV, packaging, power grid, and other sectors has remained strong and become the core support; construction extrusion has recovered slowly as work resumptions progress, and the recovery pace in traditional sectors has been relatively mild, with overall terminal support gradually strengthening. Against the backdrop of continued tightening LME liquidity, LME aluminum still has momentum to strengthen, with firm support from prices outside China, and is likely to maintain a BACK structure in the short term. In China, however, the market remains in a phase of high inventory plus weak spot fundamentals, and upward momentum is clearly weaker than outside China. Amid diverging domestic and overseas drivers, the SHFE/LME price ratio is expected to continue weakening, and aluminum prices are expected to fluctuate at highs in the short term.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions with caution and should not replace their own independent judgment with this information. Any decisions made by clients are unrelated to SMM.]
