Post-Holiday Downstream Recovery; Aluminum Price Center May Fluctuate at High Levels [SMM Aluminum Price Weekly Review]

Macro front, overseas, Trump announced a 25% tariff on all steel and aluminum imports to the US, which may increase US end-user procurement costs. Protests have been voiced from various regions, and SMM will continue to monitor the specific impacts. During Powell's testimony, he stated that the latest data shows inflationary pressures are easing but have not yet met the target. He expressed some concerns about Treasury liquidity, noting that balance sheet reduction still has a long way to go, and the US Fed may have to adjust interest rates in response to tariff policies. Domestically, the State Council studied measures to boost consumption, approved the "2025 Action Plan for Stabilizing Foreign Investment," researched policies to address structural imbalances in key industries, and discussed the "Draft Law on National Development Planning of the People's Republic of China." The favorable macro front atmosphere in China remains unchanged.

Fundamentals side, domestic aluminum operating capacity saw a slight increase. Early production cuts in Sichuan are gradually resuming, with most expected to achieve full capacity operation by the end of March, reflecting on production. In Guangxi, a loss-making aluminum plant that had reduced production has also recently resumed operations. The total resumed capacity is around 300,000 mt/year. On the cost side, domestic aluminum costs continued to decline this week. As of Thursday, the immediate full average cost of domestic aluminum was approximately 17,060 yuan/mt, down 814 yuan/mt WoW. Specifically, alumina prices continued to decline this week, reducing aluminum costs and slightly restoring aluminum profits. Demand side, post-holiday resumption of aluminum processing enterprises progressed steadily. In east China, the automotive and PV profile sectors showed stable improvement. Notably, due to new PV policies and the transition between peak and off-peak seasons, leading PV profile manufacturers saw a slight increase in orders, supporting aluminum consumption. Inventory-wise, aluminum ingot social inventory is still experiencing inventory buildup, but the rate has slowed. SMM will continue to monitor the post-holiday downstream resumption and the transit status of aluminum ingots.

In summary, the macro front presents a mix of bullish and bearish factors. Domestically, efforts to boost consumption continue, while overseas trade barriers are intensifying. However, domestic enterprises and market sentiment have shown limited response to this. Fundamentals side, both supply and demand are increasing, with post-holiday demand recovery exceeding expectations. Despite the lack of cost support, aluminum futures and spot prices remain strong. In the future, with increasing PV demand and comprehensive resumption of end-user operations, coupled with limited supply-side growth, aluminum prices may fluctuate at high levels. Next week, the most-traded SHFE aluminum contract is expected to operate around 20,350-20,900 yuan/mt, while LME aluminum is expected to range between $2,580-2,680/mt.

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