US Fed Keeps Interest Rates Unchanged; Seasonal Destocking Trend in "Golden March and Silver April" Becomes Clear; Aluminum Market Sentiment Rebounds [SMM Aluminum Morning Meeting Summary]

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March 20 SMM Aluminum Morning Meeting Summary

Futures Market: Overnight, the most-traded SHFE aluminum 2505 contract opened at 20,760 yuan/mt, hit a high of 20,770 yuan/mt, a low of 20,680 yuan/mt, and closed at 20,730 yuan/mt, up 25 yuan/mt or 0.12%. Yesterday, LME aluminum opened at $2,651/mt, reached a high of $2,678/mt, a low of $2,646/mt, and closed at $2,673/mt, up $22/mt or 0.83%.

Macro Perspective: Overseas, (1) US Fed meeting - ① Maintained interest rates at 4.25%-4.5%, slowed the pace of Treasury reductions to $5 billion, with MBS unchanged; Waller opposed, favoring the original pace (neutral). ② Significantly lowered this year's economic growth forecast by 0.4 percentage points and raised inflation expectations (bearish★). ③ Powell - Emphasized uncertainty multiple times, reiterated no rush to adjust stance, stated the current state allows for both rate cuts and restrictive policies; short-term inflation expectations rose, long-term remained stable; if recent commodity inflation data remains strong, it is certainly related to tariffs (bearish★). (2) The EU plans to cut steel imports by 15% starting April 1 to prevent cheap steel from flooding the European market after new US tariffs (neutral). (3) Domestically, the Ministry of Transport and two other departments issued the "2025 NEV Urban Bus and Power Battery Renewal Subsidy Implementation Details," using ultra-long-term special treasury funds to stimulate NEV bus updates (maximum subsidy of 80,000 yuan per vehicle) (bullish★). (4) The Hubei Provincial Bureau of Statistics released the province's economic performance for January-February this year. The initial economic "report card" showed overall stable operation, strong growth in major indicators, effective release of domestic demand potential, and accelerated cultivation of new momentum. New quality productive forces remain a key driver of Hubei's industrial economic growth. From January to February, the industrial added value of enterprises above designated size in the province increased by 7.9% YoY, 2.0 percentage points higher than the national average (bullish★).

Fundamentals: (1) According to SMM statistics, as of March 20, domestic aluminum ingot inventory in major consumption areas stood at 839,000 mt, down 28,000 mt WoW (bullish★). (2) On March 19, LME aluminum inventory recorded 489,125 mt, down 4,125 mt or 0.84% from the previous day (bullish★).

Primary Aluminum Market: Yesterday morning, the center of the SHFE front-month aluminum contract fell below 20,700 yuan/mt, with some regions trading below the monthly long-term contract execution price. In the spot market, the absolute price center in east China shifted downward, market transactions improved, and downstream just-in-time restocking increased. Transactions for SMM A00 aluminum were on par with to a premium of 10 yuan/mt against the SHFE 2504 contract, up 10 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 20,590 yuan/mt, down 200 yuan/mt from the previous trading day. In central China, aluminum prices were previously at highs, leading downstream processing enterprises to accumulate finished product inventories and adopt cautious raw material restocking. Recently, as aluminum prices shifted downward, downstream just-in-time procurement increased, but the proportion of funds tied up in finished product inventories remained high, limiting significant restocking. Spot premiums only saw a slight recovery. SMM central China A00 aluminum was recorded at 20,480 yuan/mt, down 180 yuan/mt from the previous trading day, with a Henan-Shanghai price spread of -120 yuan/mt. Actual market transactions were on par with to a premium of 10 yuan/mt against SMM central China prices. As aluminum prices continued to decline, intraday transactions slightly improved. Attention should be paid to downstream restocking activities, as the premium center is expected to stabilize.

Secondary Aluminum Raw Materials: Yesterday, primary aluminum spot prices fell by 200 yuan/mt from the previous trading day, with SMM A00 spot aluminum closing at 20,590 yuan/mt. The aluminum scrap market followed the decline significantly, but downstream maintained purchasing as needed due to a lack of improvement in terminal orders. Yesterday, baled UBC aluminum scrap was quoted at 15,100-16,000 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 16,350-17,850 yuan/mt (excluding tax). In the short term, the domestic aluminum scrap market is unlikely to see significant improvement in the weak supply-demand situation. Coupled with high prices for primary and aluminum scrap, downstream is expected to maintain purchasing as needed, with aluminum scrap prices likely to fluctuate rangebound alongside primary aluminum.

Secondary Aluminum Alloy: Yesterday, aluminum prices extended their decline, with SMM A00 aluminum prices down 200 yuan/mt from the previous trading day to 20,590 yuan/mt. Secondary aluminum prices generally fell. Domestic SMM ADC12 prices dropped by 100 yuan/mt from the previous day to the range of 21,100-21,300 yuan/mt. In the import market, domestic price declines slightly widened immediate import losses. Yesterday, aluminum prices continued to fall, with most secondary aluminum market quotes down by 100 yuan/mt. Currently, downstream demand remains relatively weak, with orders continuing to show weakness. In the short term, under cost relaxation and the impact of low-priced market supplies, ADC12 prices are expected to face continued downward pressure.

Summary: From a macro perspective, the US Fed's March meeting announced no change to the benchmark interest rate, aligning with market expectations, and signaled a dovish stance for potential rate cuts within the year, boosting market risk appetite and supporting an aluminum price rebound. Domestically, policy signals remain positive, with three departments using ultra-long-term special treasury funds to stimulate NEV bus updates. On the fundamentals side, the aluminum industry chain shows multiple bullish factors. According to SMM statistics, as of March 20, domestic aluminum ingot inventory in major consumption areas stood at 839,000 mt, down 28,000 mt WoW, while LME aluminum inventory also decreased by 0.82%. The seasonal destocking trend during the "golden March and silver April" period is evident, with steady growth in end-use consumption such as NEVs. Low inventory levels and policy support are expected to sustain short-term upward price fluctuations. Continued attention should be paid to changes in US tariff policies and the actual release of downstream demand.

[The information provided is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should make decisions cautiously and not substitute this for independent judgment. Any decisions made by clients are unrelated to Shanghai Metals Market.]