SMM Aluminium Market Morning Comment (Jan 22)

Last Friday’s night session, the most-traded SHFE 2403 aluminum contract opened at 18,690 yuan/mt, with its lowest and highest at 18,630 yuan/mt and 18,715 yuan/mt before closing at 18,665 yuan/mt, up 5 yuan/mt or 0.03%. LME aluminum opened at $2,172/mt last Friday, with high and low at $2,182/mt and $2,158.5/mt respectively before closing at $2,172.5/mt, an increase of $4.5/mt or 0.21%.

From a macro perspective, MoM surge in US retail sales in December exceeded market expectations and stood at 0.6% (0.40% expected). Sales of motor vehicles, personal health care and catering still maintained high YoY growth. Residential consumption were resilient. The market's expectations for Fed’s interest rate cut in first quarter fell back, the US dollar index rebounded, and commodities were under pressure. Domestically, China’s GDP grew by 5.2% in 2023. In December, total retail sales increased by 7.4% YoY, and the growth rate of added value in industries above the designated size hit a 22-month high. Real estate remained weak, manufacturing investment rebounded, and the overall macroeconomic atmosphere at home and abroad was weak. In terms of fundamentals, domestic aluminium supply has entered a stable period, overseas primary aluminium import windows continue to open, and the net import volume of primary aluminium remains at a high level, impacting domestic primary aluminium to a certain extent. Domestic primary aluminium social inventories may enter a seasonal inventory accumulation cycle at the end of the month, but considering the industry's aluminium liquid conversion rate of around 70%, it is expected that the total inventory before the holidays this year will be far lower than the same period last year. In the short term, the macroeconomic data at home and abroad perform poorly amid market pessimism, and domestic aluminium downstream industries are entering the off-season, which will put pressure on aluminium prices.