US Employment Data Falls Short of Expectations, Aluminum Ingot Continues Destocking Trend This Week [SMM Aluminum Morning Meeting Summary]

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March 10 SMM Aluminum Morning Briefing

Futures: Last Friday, the SHFE aluminum 2504 contract opened at 20,855 yuan/mt, with a high of 20,920 yuan/mt and a low of 20,790 yuan/mt, closing at 20,880 yuan/mt, down 5 yuan/mt or 0.02% from the previous settlement. On the same day, LME aluminum opened at $2,699/mt, reached a high of $2,711/mt and a low of $2,675.5/mt, and closed at $2,689/mt, down $14/mt or 0.52%.

Macro: (1) In February, US non-farm payrolls increased by 151,000, slightly below market expectations. The unemployment rate rose to 4.1%, the highest since November 2024, compared to an expected 4% and a previous value of 4%. (Bullish★) (2) The Office of the Customs Tariff Commission of the State Council announced that the Canadian government will impose a 100% tariff on Chinese EVs starting October 1, 2024, and a 25% tariff on Chinese steel and aluminum products starting October 22, 2024. This unilateral tariff hike disregards objective facts and WTO rules, representing typical trade protectionism, discriminatory measures against China, severely infringing on China's legitimate rights and interests, and damaging Sino-Canadian economic and trade relations. (Bearish★)

Fundamentals: (1) According to the SMM survey, the operating rate of the aluminum processing industry showed a weak recovery last week, up 1 percentage point WoW to 60.8%. Current end-use consumption recovery remains limited, and the operating rate of the aluminum processing industry is expected to continue a mild rebound in March. (Bullish★) (2) According to the latest data from the General Administration of Customs, in February 2025, China's exports of unwrought aluminum and aluminum semis totaled 408,000 mt, down 9.53% MoM and 12.70% YoY. Cumulative exports for 2025 reached 859,000 mt, down 11.0% YoY. Aluminum semis exports are expected to remain weak MoM in March, with attention needed on changes in overseas aluminum tariffs. (Bearish★) (3) SHFE announced that, effective from the settlement on Tuesday, March 11, 2025, the price limit for alumina futures contracts will be adjusted to 8%, with the margin ratio for hedging trades set at 9% and for speculative trades at 10%. (Neutral)

Primary Aluminum Market: Last Friday morning, SHFE aluminum front-month contract fluctuated at highs, with varying market activity levels. Traders were active, while downstream buyers were cautious and purchased sparingly. Specifically, trading activity among traders in east China was slightly more positive than the previous day, while downstream buyers were hesitant due to high prices. Spot discounts remained unchanged from the previous trading day. Last Friday, SMM A00 aluminum recorded a discount of 50 yuan/mt against the SHFE aluminum 2503 contract, with SMM A00 aluminum ingot prices at 20,840 yuan/mt, up 40 yuan/mt from the previous trading day. In central China, downstream buyers focused on long-term contract pick-ups due to high aluminum prices, prioritizing reductions in finished goods and raw material inventories. Market activity showed no significant improvement, while trading at trade circulation ports was relatively active, with suppliers maintaining high enthusiasm for selling. Transactions were mainly on par with or at a discount of 10 yuan/mt against central China prices. SMM central China A00 aluminum recorded 20,720 yuan/mt, up 40 yuan/mt from the previous trading day. Current mainstream consumption area inventories continued to decline, but downstream buyers were cautious due to high absolute prices, limiting upward momentum for spot premiums and discounts. Aluminum prices are expected to remain relatively stable with a weak trend next week.

Secondary Aluminum Raw Materials: Last Friday, aluminum scrap market quotes were largely stable. Baled UBC aluminum scrap was quoted at 15,250-15,950 yuan/mt (tax excluded), while shredded aluminum tense scrap was quoted at 16,350-17,950 yuan/mt (tax excluded). Currently, demand from scrap utilization enterprises remains weak, with limited upward momentum for aluminum scrap prices. The price difference between primary metal and scrap slightly widened. In the short term, aluminum scrap prices will continue to fluctuate rangebound, following primary aluminum.

Secondary Aluminum Alloy: Last Friday, secondary aluminum alloy prices stopped rising and stabilized. Domestic SMM ADC12 prices remained at 21,200-21,400 yuan/mt. Market orders have only slightly rebounded, with weak demand continuing to limit the upside room for ADC12 prices. In the short term, ADC12 prices are expected to continue fluctuating rangebound. Attention should be paid to changes in raw material market liquidity and the progress of end-use consumption recovery.

Summary: Macro side, US employment data fell short of expectations, strengthening the outlook for multiple interest rate cuts by the US Fed this year, leading to a pullback in the US dollar index. Domestically, the Two Sessions emphasized stabilizing the economy, providing macro support for aluminum prices. Fundamentals side, domestic aluminum production resumption is progressing, with capacity expected to be released by the end of March. Inventory-wise, aluminum inventories continued to decline this week. According to the SMM survey, aluminum inventories fell by 18,000 mt WoW to 868,000 mt today. Coupled with the "golden March and silver April" peak season, operating rates of aluminum processing enterprises continued to rise, strengthening aluminum consumption support. Overall, macro factors are mixed, with domestic macro support remaining intact, while overseas trade barriers increase but with high uncertainty. Fundamentals side, both supply and demand are growing. As the consumption peak season approaches, most sectors see rising order volumes and operating rates, combined with destocking of aluminum ingot social inventories, providing strong support for aluminum prices. In the short term, aluminum prices are expected to fluctuate upward at highs.

【The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.】