Overnight SHFE Aluminium Dropped amid Easing Russia-Ukraine Tensions

SHANGHAI, Mar 30 (SMM) - Overnight, the most-traded SHFE 2205 aluminium contract opened at 22,410 yuan/mt, with the highest and lowest prices at 22,700 yuan/mt and 22,360 yuan/mt before closing at 22,610 yuan/mt, down 350 yuan/mt or 1.52%.

LME aluminium opened at $3,607/mt on Tuesday and closed at $3,449/mt, down $156/mt or 4.33%.

Macro: (1) On March 29, local time, the head of the Russian delegation, Mezinsky, said after the first day of talks in the fifth round of Russia-Ukraine talks that the negotiations between the two sides were constructive and that the Russian side was studying the Ukrainian side's proposals and that the relevant information would be reported to President Putin (Bearish ★) (2) China National Energy Administration: It issued Guidance on Energy Work in 2022, in which it is proposed that the total national energy production shall reach around 4.41 billion mt of standard coal, crude oil production around 200 million mt  and natural gas production around 214 billion cubic meters. To ensure sufficient supply of electricity, the installed power capacity will reach 2.6 billion kilowatts, the power generation capacity will reach 9.07 trillion kilowatt hours, the newly added peak power generation capacity will be more than 80 million kilowatts, and the transmission capacity of West-to-East Power Transmission Project will reach 290 million kilowatts. (Bearish ★)

Fundamentals: (1) Yunlu Haixin’s 700,000 mt of aluminium capacity was fully put into operation. (Neutral) (2) On March 29, LME aluminium inventory data was updated with a total decrease of 7,800 mt, of which Klang and Singapore saw the largest declines, with inventory in Klang down 5,675 mt and Singapore down 2,250 mt. (Bullih ★) (3) According to Sunho Goups's annual report, it produced 1,406,600 mt of aluminium products in 2021 (including 598,600 mt in Yunnan plant and 808,100 mt in Xinjiang plant) and sold 1,147,600 mt (including 599,700 mt in Yunnan plant and 817,900 mt in Xinjiang plant), completing 87.64% and 88.32% of the annual plan respectively (Neutral)

Spot: SHFE aluminium corrected after hitting high in morning trade, and dropped below 23,000 yuan/mt. Before correction, spot aluminium was mostly in discounts of 70 yuan/mt over front-month SHFE contract, and some traders lowered their discounts by another 10-20 yuan/mt. The transactions in east China were mostly done between 22,950-22,990 yuan/mt in morning trade.

To sum up, on the supply side, domestic aluminium capacity accelerated their resumption of production, but the combined output in Q1 is unlikely to outperform that in the same period last year, coupled with the restricted transport on aluminium ingot. On the demand side, the social inventory dropped more slowly, while LME inventory dropped 7,800 mt yesterday. On the whole, rising social inventory will be bearish of aluminium prices, and easing Russia-Ukraine situation will also offer less support to the contract.