4.28 SMM Morning Meeting Minutes
Futures: SHFE aluminum 2606 contract closed at 24,645 yuan/mt in the night session on April 27, down 0.84% from the previous close. Prices pulled back below the MA5, MA10, MA20, MA40, and MA60 moving averages, with short-term moving averages continuing to decline and forming clear resistance, while mid-term support levels were breached. On the technical side, the MACD indicator's DIFF crossed below the DEA to form a death cross, with the histogram continuously expanding into green bars. Combined with bulls actively reducing positions, this indicated sustained weakening of bullish momentum. On April 27, LME aluminum closed at $3,573/mt, down 0.50%, showing an overall pattern of narrow-range weakening at high levels. Prices were running above all moving averages, with the trend structure remaining relatively strong; the MACD indicator's DIFF (68.84) and DEA (73.68) formed a death cross at high levels, with the histogram slightly negative (-9.67), indicating a notable slowdown in short-term upward momentum.
Macro front: Bridgewater founder Ray Dalio said on April 27 local time that persistent inflationary pressures combined with slowing economic growth require policymakers to remain cautious. Dalio said on Monday, "We are undoubtedly in a period of stagflation," warning that the US economy has fallen into a stagflationary environment. He also noted that if Kevin Warsh, who is about to take over as Fed Chairman, chooses to cut interest rates, it would be a policy mistake. According to the CME "FedWatch" tool: the probability of the US Fed keeping rates unchanged in April was 100%. The probability of a cumulative 25-basis-point interest rate cut by June was 4.5%, while the probability of rates remaining unchanged was 95.5%.
Fundamentals: As month-end and the Labour Day holiday approach, arrival pressure at major domestic consumption hubs is expected to remain significant. Although aluminum prices rebounded slightly after plunging from highs during the week, and downstream buy-the-dip restocking enthusiasm was moderate, which to some extent boosted warehouse withdrawals, it was still not enough to support destocking in China. Currently, operating aluminum capacity in China stays high, with strong rigidity on the supply side; meanwhile, downstream demand remains at just-needed levels, with high aluminum prices suppressing restocking enthusiasm and weak demand recovery during the peak-off season transition. The widening Guangdong-Shanghai price spread has triggered cross-regional transfers, reshaping regional cargo flows, but this is unlikely to change the overall inventory landscape in the short term.
Primary aluminum market: On Monday morning, SHFE aluminum 2605 fluctuated upward. Affected by weekend restocking, pre-Labour Day holiday stockpiling, and invoice shortages, overall buyer purchasing sentiment for aluminum ingots with cargoes with invoices dated this month declined slightly but remained at a relatively strong level. Mainstream transactions for cargoes with invoices dated this month were concentrated around the SMM A00 aluminum average price to +10 yuan/mt. On Monday, the east China market shipments sentiment index was 3.32, down 0.1 MoM; the procurement sentiment index was 3,292, down 0.03 MoM. On Monday, the central China market saw a relatively heated trading atmosphere for cargoes with invoices dated this month, with declining invoicing quotas and tight supply of cargoes with invoices dated this month. Traders in the market were generally short of invoices, causing a minor scramble. Meanwhile, concerns about whether invoices for the following month would be issued on schedule were notable, trading was sluggish, and downstream processing enterprises purchased limited volumes, with overall trading of cargoes with invoices dated next month remaining sluggish. Ultimately, actual transaction prices in the central China market hovered between a premium of 10 yuan and a discount of 20 yuan to the central China price. On Monday, the central China market shipments sentiment index was 2.83, up 0.02 WoW; the procurement sentiment index was 2.34, down 0.05 WoW.
Aluminum scrap: On Monday, spot primary aluminum rose 60 yuan/mt from the previous trading day, while aluminum scrap market prices remained generally stable with minor adjustments. In terms of the price difference between A00 aluminum and aluminum scrap, on April 27, the price difference between A00 aluminum and mixed aluminum extrusion scrap free of paint in Foshan was recorded at 2,768 yuan/mt, and the price difference between A00 aluminum and shredded aluminum tense scrap was 2,015 yuan/mt. Supply side, tightening regulation on reverse invoicing and the cancellation of tax rebates led to tight compliant invoiced supply. On the import front, aluminum scrap imports in March reached 197,300 mt, surging 44.75% MoM, but import traders grew increasingly cautious in their procurement sentiment due to continuously rising LME prices, and imports are expected to pull back going forward. Demand side, the "Golden March, Silver April" peak season saw divergent production starts — aluminum tense scrap segment purchased as needed and operated with low inventory, with transactions dominated by rigid demand and strong wait-and-see sentiment, while the wrought aluminum alloy scrap segment saw some support from peak-season stockpiling but with limited intensity. Overall, supply-side policy constraints are unlikely to ease in the short term, with tight compliant supply combined with scrapyards holding back from selling providing support, and the increasing probability of a pullback in subsequent imports will further intensify the tight supply situation. Demand side, the divergence between aluminum tense scrap and wrought aluminum alloy scrap downstream remained unchanged, with aluminum price fluctuations and a lack of orders continuing to suppress purchase willingness. In the short term, the outlook for the US-Iran conflict remains unclear, and tight compliant supply along with an expected pullback in aluminum scrap imports will support aluminum scrap prices to hold up well.
Secondary aluminum alloy: The ADC12 market currently remained largely stable, with the SMM ADC12 price unchanged from the previous trading day at 24,100 yuan/mt. Cost side, aluminum price fluctuations narrowed, offering limited price support. Demand side, although the Labour Day holiday is approaching, downstream orders shrank, leading to weak stockpiling willingness, a slower procurement pace, and persistently sluggish market transactions. Enterprises showed slight divergence in their willingness to adjust prices, but actual execution mostly centered on maintaining stable prices with a wait-and-see approach. In the short term, ADC12 prices are expected to move sideways, with clearly insufficient upward momentum ahead of the holiday.
Aluminum market summary: Affected by the ongoing geopolitical conflict in the Middle East, navigation through the Strait of Hormuz was restricted, regional aluminum capacity saw production cuts, the global aluminum market supply deficit intensified, and the ex-China aluminum supply-demand gap became prominent. LME aluminum premiums recovered and rose, inventory continued to pull back to low levels, strongly supporting LME aluminum prices to strengthen. In contrast, in China, downstream processing enterprises saw declining operating rates, high aluminum prices suppressed purchase willingness, aluminum ingot warehousing in Wuxi was backed up, and China's social inventory saw inventory buildup again, remaining at elevated levels. Overall, geopolitical risks outside China persisted and supply tightened, with LME aluminum prices maintaining a relatively strong trend; high inventory in China coupled with weak demand limited SHFE upside room, and the divergence between domestic and overseas trends was evident.
[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and not replace their own independent judgment with this. Any decisions made by clients are not related to SMM.]
