Middle East Turmoil Fuels Aluminum Supply Fears, Inflation Uncertainty Rises

[SMM Aluminum Express News] President Prabowo Subianto emphasized that downstream processing (hilirisasi) will create high-quality job opportunities, especially for young people in industry and technology sectors. He highlighted Indonesia's huge potential in the natural resource-based automotive industry, using the example of bauxite: "We have bauxite. Bauxite is processed into alumina, then into aluminum. Aluminum becomes cars. But we don't process our bauxite. Japan doesn't have bauxite, yet they make the best cars. Right? This is what we have to do." The statement underscores the government's push to move up the value chain—from raw bauxite to finished products like aluminum components for vehicles—creating jobs, increasing added value, and reducing reliance on raw exports.

[Macro-Geopolitical Risks Have Yet to Subside, and Aluminum Prices Maintain a Fluctuating Trend] Continued destocking in LME inventory has provided bottom support for LME aluminum, but with tightening liquidity and profit-taking by bulls, upside momentum remained insufficient, and the backwardation structure has weakened somewhat. China’s social inventory rose to a high for the same period in nearly five years, and the inventory buildup cycle has yet to end; high inventory and weak spot fundamentals jointly suppressed upward momentum. Divergence between domestic and overseas drivers continued, the SHFE/LME price ratio kept weakening, and prices were mainly under pressure in the short term.

[SMM Cast Aluminum Alloy Morning Comment: Futures Extended Losses, While Trading Sentiment Recovered Slightly] Market quotes generally moved lower last Friday, with the SMM ADC12 price down 300 yuan/mt to 25,000 yuan/mt. Driven by the price pullback and weekend restocking demand, market trading sentiment recovered somewhat from the previous period, and downstream purchase willingness to buy the dip strengthened, improving transactions for some enterprises. However, overall demand still mainly reflected rigid demand, end-users remained sensitive to price fluctuations, and the pace of restocking stayed cautious. In the short term, ADC12 prices are expected to remain in the doldrums. The pattern of demand being under pressure is unlikely to change in the short term; downstream acceptance of high prices is limited, and coupled with the weak trend in primary aluminum weighing on market sentiment, prices struggled to rise. But with cost support, downside room is also limited. Going forward, close attention should be paid to the trend in primary aluminum and the pace of downstream consumption release.