Aluminum prices remained high before the holiday, and processing fees in the aluminum rod market were sluggish [SMM analysis]

Qingming Festival has come to an end and the market will return to normal on next Monday. The aluminum price market was extremely brisk before the holiday. Let us first review the aluminum price trend before the holiday.
According to SMM data, the SMM A00 aluminum price rose from 19,540 yuan/ton to 19,750 yuan/ton in the three days before the holiday, and the premium or discount narrowed from -110 yuan/ton to -90 yuan/ton, showing an unusually strong performance. From a macro perspective, the attitudes of overseas Federal Reserve officials have been changeable. In the past week, there have been "both hawkish and dovish" attitudes and positions that have wavered, disturbing market sentiment. However, judging from the US economic data for February that have been released, the US economy is currently showing resilience and is more inclined to believe that there will be no interest rate cuts in the short term. From a domestic perspective, China's PMI index has returned to the expansion range, various provinces and cities have introduced real estate rescue policies, and the country has promoted the integration of the new energy vehicle industry into the new power system, providing guidance and support for domestic consumption. In terms of fundamentals, although aluminum prices have been relatively strong, domestic aluminum ingot inventories continued to destock on the day before the holiday, supported by the decrease in the arrival of aluminum ingots and the rigid demand of downstream aluminum processing. Among them, Gongyi and Wuxi regions performed relatively strongly. In addition, the sentiment for receiving goods in the spot market has improved, the market's adaptability to the current aluminum price has increased, the spot market was active before the holiday, and the discounts in the aluminum ingot spot markets in the three places have narrowed.
Overall, the overseas macroeconomic environment is slightly bearish, and non-ferrous metals are under pressure, but the domestic macroeconomic environment is relatively strong. Supported by the destocking of aluminum ingots and downstream rigid consumption, aluminum prices are expected to continue their strong and volatile trend after the holiday.
In terms of aluminum rods, the processing fees were relatively stable before the festival. The average ex-factory price of 1A60 general aluminum rod processing fees in Shandong was 400 yuan/ton; the average ex-factory price of 1A60 aluminum rod processing fees in Henan was 350 yuan/ton, which remained unchanged; the average ex-factory price of 1A60 aluminum rod processing fees in Inner Mongolia was 150 yuan/ton; the average arrival price of 1A60 aluminum rod processing fees in south China was 500 yuan/ton. Except for South China, the prices in the other three regions were reduced by 50 yuan/ton, and the actual transaction prices were all lower than the quoted prices. The aluminum rod market is still in oversupply recently. As the base price of aluminum remains high, downstream buyers are more cautious about accepting goods. The supply of the market is relatively loose, while the demand is tight, and the processing fee of aluminum rods has come under pressure to fall. According to feedback from aluminum rod companies in Inner Mongolia, they sold aluminum rods in the market to clear inventory in order to recover funds some time ago, but the inventory has accumulated again recently and the shipment situation is still not optimistic. At the same time, some companies have reported that the current aluminum price is too high, and companies will focus on hedging the market value to ensure their own profit margins. In addition, according to statistics, April to June is the peak period for State Grid's order pick-up. Even though aluminum prices are running at a high level, downstream rigid demand is gradually returning to normal prices. According to market performance, processing fees are expected to remain stable in the near future. However, if aluminum prices fall slightly, aluminum rod processing fees may have room for recovery.