SMM Aluminum Market Morning Comment (May 29)

The most-traded SHFE 2407 aluminum contract opened at 21,250 yuan/mt overnight, reaching a high of 21,300 yuan/mt, a low of 21,125 yuan/mt, and closed at 21,205 yuan/mt, up 20 yuan/mt or 0.09%. LME aluminum opened at $2,667/mt in the previous trading session, reaching a high of $2,741.5/mt, a low of $2,667/mt, and closed at $2,732/mt, up $74/mt or 2.78%.

Summary: On the macro front, the US Fed took a hawkish stance again mid-week, but due to the impact of geopolitical tensions and a weakening US dollar, the external macro performance remained bullish. The China-Japan-South Korea leaders' meeting resumed after four-and-a-half-year, and multiple provinces and cities in China implemented new real estate policies, boosting expectations of a real estate recovery. On the fundamentals, domestic aluminum operating capacity continued to increase during the week, with good progress in resuming production in Yunnan, which is expected to be completed in June. Supply pressure may gradually become prominent, with aluminum ingot inventories continuing to accumulate, and high aluminum prices inhibiting inventory consumption. However, LME aluminum inventories fell slightly from highs. During the week, spot alumina prices continued to rise, domestic aluminum costs continued to climb, and the import window remained closed, which may provide some support for aluminum prices. However, from the demand, recent aluminum prices hit a record high for the year and showed strong volatility, inhibiting downstream delivery enthusiasm and leading to a decline in orders and operating rates for aluminum processing enterprises. In addition, the current stage is the transition from the off-season to the peak season, and orders from multiple sector show signs of a slight decline. The subsequent comprehensive operating rate is expected to weaken. SMM predicts that aluminum prices will hover around the current level in the short term.