SMM Aluminum Market Morning Comment (May 28)

The most-traded SHFE 2407 aluminum contract opened at 20,925 yuan/mt, reached a high of 21,215 yuan/mt, a low of 20,925 yuan/mt, and closed at 21,160 yuan/mt, up 160 yuan/mt or 0.76%. Due to the UK Spring Bank Holiday, the London Metal Exchange (LME) was closed on Monday (May 27) and will resume trading on Tuesday.

On the macro front, despite the latest hawkish comments from US Fed Governor Waller over the weekend, the likelihood of a second rate cut by the European Central Bank in July has increased. Influenced by geopolitical tensions and a weaker dollar, the external macro performance is relatively positive. The China-Japan-South Korea leaders' meeting has resumed after four and a half years, and multiple provinces and cities in China are implementing new real estate policies, boosting expectations of a real estate market recovery. On the fundamentals, domestic aluminium operating capacity continued to rise during the week, with good progress in the resumption of production in Yunnan, which may be completed in June, gradually highlighting supply-side pressure. Social inventory of aluminum ingots has been accumulating continuously, and high aluminum prices are inhibiting inventory consumption. LME aluminum inventory also remains on an upward trend. Alumina spot prices maintained an upward trend during the week, and domestic aluminium production costs continued to rise, with the import window remaining closed, which may provide some support for aluminum prices. However, from the demand side, aluminum prices hit a new high for the year last week, with strong volatility, inhibiting downstream procurement enthusiasm, leading to a reduction in orders and operating rates for aluminum processing enterprises. Additionally, as the market transitions between peak and off-peak seasons, many sectors are seeing a slight decline in orders, and the overall operating rate is expected to weaken steadily. SMM expects short-term aluminum prices to hover around the current level.