3.26 SMM Morning Meeting Summary
Futures: In the night session on March 25, the most-traded SHFE aluminum 2605 contract opened at 23,890 yuan/mt, hit a high of 23,900 yuan/mt and a low of 23,745 yuan/mt, and finally closed at 23,820 yuan/mt, down 0.17%. Open interest in the night session stood at 269,000 lots, an increase of 1,711 lots from the daytime session. Prices rose with open interest increasing, indicating that funds were replenishing long positions at low levels and showing some recognition of the rebound. RSI rebounded from lows to around 50, neutral to slightly strong, without entering overbought territory. LME aluminum opened at $3,260/mt, hit a high of $3,264.5/mt and a low of $3,219/mt, and closed at $3,242/mt, down 0.11%. Trading volume was 19,906 lots, down 5,391 lots, while open interest was 68.5 lots, up 4,082 lots.
Macro front: In the early hours of the 25th, Tehran time, Iran's permanent mission to the United Nations issued a statement on social media saying that non-hostile vessels may safely pass through the Strait of Hormuz in coordination with the relevant Iranian authorities, provided that the countries to which they belong or with which they are associated do not participate in or support acts of aggression against Iran and fully comply with the announced safety and security regulations. (Neutral) The White House said that US-Iran negotiations were "ongoing and productive," and Trump therefore instructed the US Department of Defense to delay strikes on Iran's power and energy infrastructure. If Iran refuses to accept reality, the US will take tougher action. (Neutral)
Fundamentals: Inventory side, as of Thursday, aluminum ingot inventory in China's major consumption regions increased by 12,000 mt from Monday, with the main sources of inventory buildup being Foshan, Chongqing, and Hangzhou, while Gongyi and Tianjin posted slight destocking. Yesterday, aluminum billet inventory in two regions fell slightly to 11,500 mt.
Primary Aluminum Market: In early trading, SHFE aluminum 2604 fluctuated downward, while edging slightly higher than the previous trading day. Overall market buying sentiment was relatively good, and sellers held prices firm as aluminum prices remained at relatively low levels. Later in the morning, SHFE aluminum 2604 fluctuated upward, with its center moving higher than the previous trading day. Some sellers still did not quote prices, while some showed a notably stronger willingness to hold prices firm. Overall market buying sentiment was relatively good. Yesterday, mainstream transaction prices in the market were mostly around the average price of the SHFE aluminum 04 contract to +10 yuan/mt. Yesterday, the east China market shipment sentiment index was 2.64, up 0.01 MoM; the purchasing sentiment index was 2.42, up 0.02 MoM. Yesterday, aluminum prices stopped falling and rebounded. Affected by the fear of further declines over the previous two days, buying sentiment among central China traders and downstream processing enterprises improved slightly from the previous day, but overall transactions had not yet returned to a fully active state, and buyers tended to expand discounts when making purchases. The final actual transaction prices in the central China market ranged from 20 yuan/mt below the central China price to 10 yuan/mt above it. Yesterday, the shipment sentiment index in the central China market was 2.64, up 0.01 MoM; the purchasing sentiment index was 2.42, up 0.02 MoM.
Aluminum Scrap: Yesterday, spot primary aluminum rose 290 yuan/mt from the previous trading day, and the aluminum scrap market generally followed higher. To correct aluminum scrap prices that had deviated from actual market transaction levels amid wild swings in aluminum prices, some alloy enterprises in Jiangxi and Anhui made substantial adjustments to prices of tense scrap series such as shredded aluminum tense scrap and ADC12 aluminum shavings, with single-day increases of 500-700 yuan/mt. Under the current wild swings in aluminum prices, scrap yards showed rising willingness to hold back cargoes, highlighting the resilience of aluminum scrap prices. On the other hand, stricter regulatory oversight under the “reverse invoicing” policy sharply increased tax compliance costs in the aluminum scrap recycling segment. In some regions, as operating procedures have yet to be fully streamlined, the supply of actually compliant, invoice-backed, and tradable cargoes remained tight, and supply-side elasticity was significantly weakened by policy friction. In terms of the price difference between A00 aluminum and aluminum scrap, as of March 25, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 2,855 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 1,565 yuan/mt. The aluminum scrap market is expected to enter a weak consolidation phase this week, with the mainstream range for shredded aluminum tense scrap (priced based on aluminum content) hovering at 20,000-20,600 yuan/mt (ex-tax). Supply side, regulatory policies such as reverse invoicing are unlikely to see substantive easing in the short term, compliance costs in the aluminum scrap recycling segment remain high, and raw material circulation efficiency continues to be suppressed. Demand side, expectations for aluminum prices to remain in the doldrums will weigh on the buying and selling sentiment of traders and downstream scrap utilization enterprises. In addition, the peak season of “Golden March and Silver April” has fallen short of expectations, the release pace of terminal orders has lagged notably behind the seasonal pattern, and downstream scrap utilization enterprises have mostly been purchasing as needed, lacking motivation for large-scale restocking. In the short term, close attention is still needed on the impact of geopolitical conflicts on fluctuations in primary aluminum prices, the actual recovery of terminal orders, and the actual implementation progress of supply-side policies, with vigilance against the risk of wild price swings.
Secondary Aluminum Alloy: In futures, the aluminum alloy 2604 contract opened at 22,885 yuan/mt in early trading. Intraday trading was active, with a high of 23,015 yuan/mt and a low of 22,540 yuan/mt. It closed at 22,960 yuan/mt at midday, up 260 yuan/mt, or 1.15%, from the previous settlement price. From the intraday trend, prices repeatedly fluctuated around the average price line, with a fierce tug-of-war between longs and shorts, multiple retreats after rapid rise during the session, and a notable rally late in the morning session. In the spot market, the secondary aluminum alloy market was lifted by the rebound in futures yesterday, and quotations were raised slightly, with mainstream gains of 100 yuan/mt. Some enterprises raised prices accordingly to recoup earlier losses, and market sentiment recovered slightly from the previous period. However, transactions remained weak, with downstream players mainly purchasing as needed and showing limited acceptance of high prices, constraining upside room for prices. In the short term, ADC12 prices are expected to fluctuate rangebound, and further gains will still require substantive improvement on the demand side. In markets outside China, current overseas ADC12 quotations remained in the range of $3,220-3,260/mt, with immediate import losses continuing at around 2,000 yuan, leaving the theoretical import window closed.
Aluminum Market Summary:Currently, macro and geopolitical risks in the global aluminum market had not yet faded. The Middle East situation remained stagnant, and threats to navigation through the Strait of Hormuz were unresolved. Aluminum enterprises in the region faced two-way disruptions to raw material imports and product exports, putting the stability of the global aluminum supply chain under pressure, and the risk premium persisted. However, earlier in the week, part of the risk premium retreated as sentiment eased and bulls took profits. Affected by stronger-than-expected US employment and inflation data, market expectations for interest rate cuts were pushed back significantly, with the first cut this year likely postponed to late Q3 to Q4. A stronger US dollar, coupled with expectations of tighter liquidity, continued to weigh on the valuation of commodities. Fundamentally, expectations for aluminum production cuts outside China still remained, with Europe, the Middle East, and other regions disturbed by energy and logistics factors, and some capacity entering maintenance cycles, so the logic of global supply contraction remained intact; in China, aluminum operating rates remained stable, supply-side increments were limited, and overall supply held steady. After the holiday, demand in China entered a phase of gradual recovery, the share of direct supply of liquid aluminum increased, and the operating rate of downstream processing enterprises rebounded MoM, with the industry gradually returning to a normal production pace. Among them, demand from PV, packaging, and power grid sectors was strong, providing core support; construction extrusion recovered slowly as work resumed, the recovery pace in traditional sectors remained mild, and overall support from end-users gradually strengthened. Continued destocking of LME inventory provided bottom support for LME aluminum, but against the backdrop of tighter capital liquidity and profit-taking by bulls, upward momentum was insufficient, and the backwardation structure weakened somewhat. China social inventory rose to a high for the same period in nearly five years, the inventory buildup cycle had not ended, and high inventory plus weak spot fundamentals jointly suppressed upside momentum. Divergence between domestic and overseas drivers continued, the SHFE/LME price ratio kept weakening, and the market is expected to remain under pressure 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 prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients are unrelated to SMM.]
