April Global Aluminum Market Review: Divergent Domestic and International Trends with Significant Differences in Spot Structure [SMM Analysis]

April Global Aluminum Market Review: Divergent Domestic and Overseas Trends with Significant Spot Structure Differences

In April, the global aluminum market exhibited a core pattern where LME outperformed SHFE with divergent trends. The most-traded SHFE aluminum contract fluctuated at highs before pulling back, while LME aluminum maintained strength supported by low inventory and geopolitical factors, with both seeing slight corrections at month-end. Market drivers this month revolved around macro policies, geopolitical conflicts, supply-demand fundamentals, and inventory structure, with core indicator trends further highlighting the supply-demand imbalance differences between in and outside China.

I. April Aluminum Price Review: Domestic-Overseas Linkage but Divergent Strength

SHFE aluminum and LME aluminum followed a similar pace this month, both showing a pattern of initial rally followed by pullback in a fluctuating trend, but with notable differences in upward momentum and correction magnitude, with overseas aluminum prices significantly outperforming domestic ones. The SHFE/LME aluminum price ratio averaged 7.36 in March, falling to an April average of 7.03, indicating overseas aluminum prices were stronger than SHFE aluminum.

The most-traded SHFE aluminum contract rose first then declined this month, overall fluctuating at highs before pulling back. The contract opened low at 24,715 yuan/mt at the start of the month and consolidated, then driven by escalating Middle East geopolitical conflicts and strengthening LME aluminum prices, it surged to a monthly high of 25,675 yuan/mt in mid-month. In the latter part of the month, as domestic inventory continued to accumulate and downstream demand fell short of expectations, compounded by pre-Labour Day holiday risk-averse capital exits, prices pulled back continuously. As of April 30, the month-end closing price was 24,430 yuan/mt, with a monthly range of nearly 1,360 yuan/mt.

The LME aluminum 3-month contract held up well, with a slight correction in the latter part of the month. It opened at $3,459/mt at the start of the month, and in mid-month, supported by geopolitical conflict-induced overseas supply disruptions and continued inventory drawdowns, it rallied to a monthly high of $3,672/mt. Later, affected by fluctuating US-Iran negotiations, hawkish macro sentiment, and profit-taking at highs, prices pulled back slightly, closing at $3,476/mt at month-end, posting a slight monthly decline but performing far stronger than domestic SHFE aluminum overall.

Price drivers: geopolitics served as the common upward momentum for aluminum prices in and outside China this month, with Middle East production cuts and supply disruptions continuously boosting market risk-aversion sentiment. The price divergence stemmed from dual differences in macro policies and fundamentals—high inventory and weak demand in China continued to suppress aluminum price rebound space, while low inventory and tight spot conditions outside China provided strong support for LME aluminum prices.

II. Core Inventory Indicators: Domestic-Overseas Inventory Divergence with Vastly Different Supply-Demand Patterns

As a core indicator reflecting the aluminum market's supply-demand pattern, inventory trends in and outside China showed extreme divergence in April, directly determining the strength differential between the two markets' aluminum prices.

China's aluminum market inventory continued to accumulate, standing at multi-year highs for the same period. Social inventory maintained an inventory buildup trend in April, climbing to 1.465 million mt by mid-month, hitting a 5-year high for the same period. Rigid supply release and weak downstream "Silver April" demand formed a clear contradiction, with the spot market remaining loose. SHFE warrants saw continuous inventory buildup from 420,000 mt at the beginning of the month to 450,000 mt at month-end. The high warrant level further confirmed ample spot supply in China, exerting sustained pressure on aluminum prices.

Ex-China LME aluminum inventory continued to destock, hitting a nearly 20-year low. In April, total LME inventory fell from 410,000 mt to 370,000 mt, with consecutive months of destocking, and inventory levels stood at historical lows. The inventory structure showed significant divergence, with Russian aluminum accounting for approximately 92% in March. Effective circulating inventory in the market was low, and the actual tight spot supply pattern became more apparent, serving as the core support for strong LME aluminum prices.

In April, the core logic of the global aluminum market revolved around low ex-China inventory, geopolitical disruptions, hawkish US Fed stance, and high China inventory, weak demand reality, and steady-growth expectations, with in and outside China market trends diverging significantly. The most-traded SHFE aluminum contract, affected by intertwined domestic and external factors, fluctuated at highs and pulled back. LME aluminum, supported by historically low inventory and a tight spot balance, coupled with geopolitical risk premiums, maintained a fluctuate upward pattern.

[Data source disclaimer: Data other than publicly available information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.]

Data source: SMM