3.18 SMM Morning Meeting Summary
Futures: During the night session on March 17, the SHFE aluminum 2605 contract opened at 25,060 yuan/mt, hit a high of 25,110 yuan/mt and a low of 24,745 yuan/mt, and finally closed at 24,915 yuan/mt, down 75 yuan/mt from the previous close, or 0.30%. Technical analysis showed that the MA lines remained in a medium-term bullish alignment, with SMA5 (24,989.65) < SMA10 (25,042.92) > SMA20 (24,942.38) > SMA40 (24,675.55) > SMA60 (24,467.79). Medium and long-term moving averages were still diverging upward, and the medium-term trend remained bullish, but the 5-day moving average had fallen below the 10-day moving average, indicating some weakening in short-term bullish momentum. On the 4-hour candlestick chart, MACD showed a green bar (DIFF: 191.09, DEA: 253.35, STICK: -124.52). The DIFF line crossed below the DEA line to form a death cross, suggesting fading short-term bullish momentum and correction pressure on prices. In terms of open interest, night-session open interest was about 311,000 lots, up 209 lots from the previous reading, showing characteristics of bears adding positions. On March 17, LME aluminum opened at $3,394.5/mt, hit a high of $3,430.0/mt, a low of $3,359.0/mt, and closed at $3,364.5/mt, down 0.81% from the previous day. Trading volume was 27,670 lots, down 4,677 lots, and open interest was 684,000 lots, up 1,790 lots.
Macro front: Kevin Hassett, Director of the White House National Economic Council, said on March 17 local time that oil tankers "had already begun to pass through the Strait of Hormuz sporadically." He also reiterated that the Trump administration believed military action against Iran would last for weeks rather than months. (Bearish ★) Senior Iranian officials said that Iran's new supreme leader, Mojtaba Khamenei, vetoed a proposal at a foreign affairs meeting to "de-escalate tensions or achieve peace" with the US, rejecting a proposal relayed to Iran's Foreign Ministry by intermediaries from both countries. Senior Iranian officials said Mojtaba stated at the foreign affairs meeting that "now is not the time for peace," adding that the US and Israel must be defeated and pay compensation. (Bullish ★) According to CME FedWatch, the probability of the US Fed cutting interest rates by 25 basis points by this week was 0%, the probability of keeping rates unchanged was 98.9%, and the probability of a 25-basis-point hike was 1.1%. By April, the probability of a cumulative 25-basis-point rate cut was 3.1%, the probability of keeping rates unchanged was 95.9%, and the probability of a 25-basis-point hike was 1.1%. By June, the probability of a cumulative 25-basis-point rate cut was 78.1%. (Bearish ★)
Fundamentals: Inventory side, on March 17, aluminum ingot inventory in mainstream consumption regions increased by 4,000 mt MoM, with the inventory buildup mainly coming from Guangdong and Gongyi. In the short term, aluminum ingot inventory continued its seasonal buildup after the Chinese New Year. Affected by bullish market sentiment, premiums are expected to remain on a narrowing trend. LME aluminum inventory stood at 440,300 mt, down 2,500 mt from the previous day, a decrease of 0.56%; over the past week, LME aluminum inventory fell cumulatively by 12,100 mt, or 2.66%; over the past month, LME aluminum inventory fell cumulatively by 41,200 mt, or 8.56%.
Primary Aluminum Market:The SHFE aluminum 04 contract opened higher and extended gains yesterday, with strong bullish sentiment in the market. Sellers held prices firm, buyers showed greater acceptance of prices, and purchasing enthusiasm also increased. Yesterday’s mainstream quotations and transaction prices were concentrated at -10 yuan/mt to +10 yuan/mt. Yesterday, the east China market shipment sentiment index was 3.12, down 0.05 MoM; the purchasing sentiment index was 2.7, up 0.04 MoM. Yesterday, futures prices moved up after opening lower. Before the opening, quotations in the central China market were relatively high, mainly at a discount of 320-330 yuan/mt against the SHFE aluminum 04 contract, and then prices gradually declined. Traders remained strongly bullish and highly enthusiastic about purchases, with overall trading volume relatively large. When suppliers had basically finished shipments, circulating cargo became tight, and market quotations continued to rise, but the transaction scale was relatively small. In the end, the actual transaction price range in the central China market was between a discount of 10 yuan against the central China price and a premium of 40 yuan against the central China price. Yesterday, the central China market shipment sentiment index was 2.6, down 0.02 MoM; the purchasing sentiment index was 2.38, up 0.02 MoM.
Secondary Aluminum Raw Material:Yesterday, spot primary aluminum rose 110 yuan/mt from the previous trading day, while the aluminum scrap market was mainly stable with slight follow-up gains. As for the price difference between A00 aluminum and aluminum scrap, as of March 17, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was 3,625 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,711 yuan/mt. Although it is currently the traditional peak season, affected by end-user order recovery falling short of expectations and wild swings in prices, the production pace of China’s aluminum scrap yards and downstream scrap utilization enterprises remained lukewarm, and actual raw material restocking was below expectations. On the policy side, secondary aluminum enterprises lacked clear expectations for the detailed implementation rules of “reverse invoicing,” and the circulation of aluminum scrap will tighten further. Waste aluminum market is expected to hold up well at high levels this week, with the mainstream price range of shredded aluminum tense scrap (priced based on aluminum content) around 20,400-21,000 yuan/mt (ex tax excluded). Primary aluminum will still be the core driver under the influence of geopolitical tensions, and the risk of price fluctuations is intensifying. On the supply side, cargo supply is being released steadily, but policy uncertainty continues to suppress circulation efficiency. On the demand side, peak-season recovery has been relatively slow, while high prices and wild swings continue to curb 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 remaining alert to the risk of a sharp pullback from high levels.
Secondary Aluminum Alloy: Futures, the most-traded aluminum alloy 2604 contract opened at 23,710 yuan/mt in the morning session yesterday and then rose rapidly, briefly touching an intraday high of 23,945 yuan/mt. Bulls then lost momentum, and prices pulled back step by step. In the afternoon, prices fluctuated rangebound, and late in the session they fell further to an intraday low of 23,575 yuan/mt, finally closing at 23,725 yuan/mt, up slightly 0.17% from the previous trading day. In the spot market, the ADC12 market was largely stable overall yesterday, with a few enterprises raising quotes slightly. Supported by a modest strengthening in aluminum scrap prices, cost support for some enterprises improved somewhat, but due to limited fluctuations in aluminum prices and mediocre downstream demand, the market as a whole still lacked momentum for price adjustments. Overall, ADC12 prices are expected to continue fluctuating at highs in the short term. Going forward, close attention should be paid to the release pace of downstream orders, 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: At present, macro geopolitical risks in the global aluminum market have not yet faded. The Middle East remains in a stalemate, threats to navigation through the Strait of Hormuz remain unresolved, and aluminum enterprises in the region face disruptions to both raw material imports and product exports. The stability of the global aluminum supply chain is under pressure, and the risk premium remains in place. As geopolitical conflict in the Middle East has pushed up energy prices and lifted the inflation center, market expectations for interest rate cuts have been pushed back significantly. The window for the first rate cut this year will likely be delayed to late Q3 to Q4, and the pace of policy easing is becoming more cautious. Fundamentally, operating aluminum capacity outside China declined somewhat. In Europe, the Middle East, and other regions, energy, logistics, and geopolitical disruptions have pushed some capacity into production cut or shutdown cycles, further strengthening expectations for global supply contraction; in China, aluminum operating rates remained stable, and supply as a whole stayed steady. After the holiday, demand in China entered a gradual recovery track, 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, forming the core support; construction extrusion recovered slowly as work resumptions progressed, the recovery pace in traditional sectors remained mild, and overall end-user support gradually strengthened. Against the backdrop of continued tightening LME liquidity, LME aluminum still had upward momentum, with strong support from prices outside China, and is expected to maintain a Back structure in the short term. In China, however, the market remained in a phase of high inventory plus weak spot fundamentals, with upward momentum 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 continue fluctuating 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 prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients are unrelated to SMM.]
