Uncertainty Still Surrounds the Geopolitical Situation in the Middle East, and Aluminum Prices Still Have Short-Term Upward Momentum [SMM Aluminum Morning Meeting Summary]

3.11 SMM Morning Meeting Summary

Futures: SHFE aluminum closed at 24,880 yuan/mt in the night session, down 1.31%, pulling back to near MA5 (24,884). Prices remained above MA10 (24,526.5), MA30 (24,188.17), and MA60 (23,629.75), with the moving average system maintaining a bullish alignment and the medium-term uptrend remaining intact. On the MACD, DIF (299.3349) and DEA (187.0338) maintained a golden cross above the zero axis. Although the histogram narrowed, it remained positive (224.6022), indicating some weakening in bullish momentum but no turn to weakness. The core SHFE aluminum trading range was suggested at 24,500-25,200. LME aluminum closed at $3,342.5/mt in the night session, down 1.34%, falling back below MA5 (3,369.4). Prices still traded above MA10 (3,276.45), MA30 (3,160.9), and MA60 (3,109.57), and the bullish alignment remained intact. On the MACD, DIF (74.653) and DEA (44.6627) maintained a golden cross, while the histogram stayed positive (59.9807), though the reading narrowed, indicating weakening upside momentum. The core LME aluminum trading range was suggested at 3,320-3,370.

Macro Front: US President Trump said the war against Iran would end “soon,” but “not” this week. If Iran takes any action to block oil transport through the Strait of Hormuz, the US will launch an attack “20 times fiercer than ever before.” Israeli Prime Minister Netanyahu said operations against Iran were “not yet over.” Iranian Deputy Foreign Minister Gharibabadi said Iran’s only current priority was “decisive defense,” and that “the end of the war is in Iran’s hands.” (Neutral ★)

Fundamentals: Supply side, newly commissioned aluminum projects in China, Indonesia, and Angola continued to ramp up production, but escalating geopolitical conflict in the Middle East may have already affected production or shipments at some aluminum smelters, and daily average production is expected to decrease. Demand side, as downstream players gradually resumed operations after the holiday, demand recovered, and the proportion of liquid aluminum rebounded notably, with the weekly proportion up about 8 percentage points WoW. Weekly downstream operating rates increased further. Specifically, power grid order deliveries for March were clearly expected, supporting a solid recovery in demand for aluminum wire and cable; demand for can stock, automobiles, battery, and other products continued to recover, lifting demand in related sectors; construction demand recovered relatively slowly; with export tax rebates for PV products to be canceled from April 1, the PV sector’s relatively high operating rate is expected to continue through month-end March. On inventory, inventory on Monday this week increased by 15,000 mt from last Thursday. Demand remained in the recovery phase, March casting ingot volume is expected to stay high, and with some inventory not yet warehoused as well as part of aluminum smelters’ finished product inventories not yet shipped to social warehouses, the inventory buildup trend in domestic aluminum ingot social inventory is set to continue in the short term, with the post-holiday peak still expected to reach 1.35-1.4 million mt.

Primary Aluminum Market: SHFE aluminum 2603 moved lower in early trading, with the price center falling sharply from the previous trading day. Yesterday, purchasing sentiment was not materially boosted by aluminum prices, and buying interest remained weak today, with low willingness to procure. The market’s mainstream transaction prices yesterday were concentrated at discounts of 10 yuan/mt to premiums of 20 yuan/mt. Yesterday, the east China market shipment sentiment index was 3.19, down 0.03 MoM; the purchasing sentiment index was 2.53, up 0.04 MoM. Yesterday, SHFE aluminum fell sharply in early trading, but purchasing sentiment was not materially boosted by aluminum prices. Buying strength remained weak today, with low willingness to procure. The market’s mainstream transaction prices yesterday were concentrated at discounts of 130 yuan/mt to 120 yuan/mt against the SHFE aluminum 03 contract. Yesterday, the central China market shipment sentiment index was 2.58, down 0.12 MoM; the purchasing sentiment index was 2.42, up 0.02 MoM.

Aluminum Scrap: Ongoing fluctuations in geopolitical risks drove spot primary aluminum down sharply by 730 yuan/mt yesterday from the previous trading day, and the aluminum scrap market broadly followed lower. In terms of the price difference between A00 aluminum and aluminum scrap, as of March 10, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,748 yuan/mt, while the price difference between A00 aluminum and shredded aluminum tense scrap was 2,834 yuan/mt. Against the backdrop of sharp aluminum price fluctuations, sentiment toward price adjustments varied across regions. East China followed the decline quickly, with single-day increases reaching 300-500 yuan/mt, while central China and south China adjusted prices by 200-300 yuan/mt on the day. After the holiday, domestic aluminum scrap yards and downstream scrap utilization enterprises had basically resumed normal production pace across the board, but end-use demand recovered slowly, and actual raw material restocking fell short of expectations. On the policy side, secondary aluminum enterprises lacked clear expectations for the specific implementation rules of “reverse invoicing,” and aluminum scrap liquidity will tighten further. Aluminum scrap prices are expected to hold up well and fluctuate at highs this week. As post-holiday production order gradually recovered and supply release eased further, but downstream processing enterprises saw slow order recovery, overall transactions are expected to remain sluggish, and the tug-of-war between sellers and buyers will intensify in the near term. Close attention should be paid to the impact of US-Iran conflict on primary aluminum supply and transportation, the progress of downstream work resumption, and changes in recycling policies, with vigilance against heightened price fluctuation risks.

Secondary Aluminum Alloy: In futures, the aluminum alloy 2604 contract surged rapidly in early trading to an intraday high of 24,420 yuan/mt, up more than 5%, then fluctuated at highs and pulled back; it plunged sharply in the afternoon session, falling to an intraday low of 23,095 yuan/mt, before rebounding slightly into the close. It finally settled at 23,670 yuan/mt, up 390 yuan/mt from the previous close, or 1.68%; trading volume was 17,439, and open interest fell by 174 to 5,853. Yesterday, the SMM ADC12 price rose by 500 yuan/mt, the market quotation center moved up significantly, and most producers’ price adjustments were concentrated in the range of 500-600 yuan/mt. Recently, raw material prices continued to strengthen, and the cost side rose rapidly, providing a clear lift to enterprise quotations. However, downstream demand remained relatively stable. Most enterprises reported that orders and inquiry activity were generally average, with downstream procurement still mainly focused on restocking as needed. Supported by cost pressures and market expectations, enterprises showed a fairly clear willingness to raise prices. In the short term, against the backdrop of cost support and mild supply releases, ADC12 prices are expected to hold up well. The medium-term trend still depends on the recovery of end-use consumption. If die-casting industry orders increase significantly, the price center is expected to move further upward; if demand recovery falls short of expectations, coupled with a continued rise in supply-side operating rates, prices will shift into high-level consolidation.

Aluminum Market Summary:Macro front, uncertainty still remained over the geopolitical situation in the Middle East. The US, Israel, and Iran all indicated that the conflict would not end immediately, though it had not escalated further, and the potential threat to the supply chain persisted, supporting aluminum prices while the marginal impact weakened somewhat. Demand side, a post-holiday accelerated recovery emerged, the proportion of liquid aluminum rebounded sharply, and downstream operating rates increased further. Demand in power grid, can stock, automotive, battery, and other sectors recovered well, while the PV installation rush also provided short-term support. However, inventory still showed pressure. Inventory continued to increase this week, and March casting ingot output remained high. The inventory buildup trend is expected to continue, with the post-holiday peak set to reach 1.35-1.4 million mt, constraining upside room for prices. Overall, macro geopolitical risks provided bottom support. Although continued inventory buildup in domestic social inventory weighed on aluminum prices, the geopolitical situation in the Middle East remained unclear. If the geopolitical conflict persists, expectations for tightening global aluminum supply will stay strong, and aluminum prices will still have strong upward momentum. In the short term, aluminum prices are still expected to hold up well.

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