SMM Analysis of Aluminium Market from Macro and Fundamentals Perspective

SHANGHAI, Apr 10 (SMM) – On the macro front, the ADP employment report showed that the US private sector added 145,000 jobs in March, a sharp drop from 261,000 in February. Initial jobless claims in the US dropped slightly to 228,000 in the week ending April 1. The number of Americans receiving benefits after an initial week of aid rose to 1.823 million in the week ending March 25, topping estimate of 1.699 million. A series of data pointed to growing risks of US economic recession. The US dollar index and US Treasury yields softened. The market is expecting the US Fed to pause interest rate hike in May. The macro environment in China is positive. Political leaders from South-east Asia and Europe paid a visit to China, and both sides expressed hope for strengthening cooperation and win-win in the future. Meanwhile, the acceleration of RMB internationalisation continued to boost market confidence.

In terms of fundamentals, aluminium smelters in Yunnan maintained stable production, while a few smelters in Guizhou and Guangxi increased production marginally. SMM statistics showed that China's aluminium output rose 2.9% YoY to 3.41 million mt in March. The share of molten aluminium output rose to 71% in March to meet growing demand from aluminium billet and alloy plants as their operating rates picked up. Lower aluminium ingot output will allow social inventories to extend declines. In downstream sectors, aluminium alloy segment performed poorly, while aluminium plate/sheet, strip and foil segments saw little change in their operating rates. Operating rates across wire & cable and extrusion segments maintained an upward trend. In particular, large wire and cable producers reported tight production schedules on the back of saturated orders, while extruders saw a significant increase in orders from construction and engineering industries. Aluminium ingot social inventories kept falling, while billet stocks accumulated due to enormous arrivals and poor demand.