Short-Term Easing of International Trade Frictions, Short-Term Bullish Factors Dominate [SMM Aluminum Morning Meeting Summary]

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4.11 SMM Aluminum Morning Meeting Summary

Futures: Last night, the SHFE aluminum 2505 contract opened at 19,780 yuan/mt, with a high of 19,810 yuan/mt and a low of 19,670 yuan/mt, closing at 19,725 yuan/mt, up 110 yuan/mt, a 0.56% increase. Last night, LME aluminum opened at $2,366/mt, with a high of $2,376/mt and a low of $2,366/mt, closing at $2,373/mt, up $3/mt, a 0.15% increase.

Macro: (1) Trump: The first agreement on tariffs is very close to being reached. Tariffs may bring "transitional issues," but the US is in a very good state. White House trade advisor Navarro said the market decline on the 10th was no big deal. (Bullish★) (2) The US March unadjusted CPI YoY was 2.4%, hitting a six-month low, below the market expectation of 2.6%. The market has almost fully priced in a US Fed interest rate cut in June. Trump said inflation has declined. (Bullish★) (3) Ministry of Commerce: Recently organized a symposium to study helping foreign trade enterprises expand domestic sales channels. The current bonded policies in special customs supervision areas within the pilot free trade zones remain unchanged. (Bullish★)

Fundamentals: (1) On April 10, SMM statistics showed that the aluminum inventory in the Shanghai Bonded Zone was 75,500 mt, and the Guangdong Bonded Zone inventory was 19,700 mt, totaling 95,200 mt, an increase of 3,000 mt WoW. (Bearish★) (2) According to SMM statistics, on April 10, the inventory of aluminum ingots in mainstream domestic consumption areas was 744,000 mt, down 30,000 mt from Monday this week and down 21,000 mt WoW from last Thursday. SMM believes that although there was a slight inventory buildup on the first day after the Qingming Festival, the overall destocking trend in the first half of April has not changed. Coupled with the rapid decline in aluminum prices earlier this week, which stimulated some purchasing demand in the market, domestic aluminum ingot inventory fell rapidly by 30,000 mt mid-week, successfully pulling back below 750,000 mt, once again strengthening fundamental support for the aluminum market and effectively boosting market confidence. (Bullish★)

Primary aluminum market: Yesterday, SHFE aluminum rebounded sharply in the early session due to fundamental destocking support, with downstream buyers actively purchasing on the bullish outlook. However, as suppliers actively shipped due to favorable structures, spot premiums narrowed, and the market sold at a discount to SMM. Specifically, the east China spot market traded at SMM-10, -20; in the central China market, spot arbitrage opportunities opened up, with suppliers shipping more, and spot traded at SMM central China average price to -10.

Secondary aluminum raw materials: Yesterday, spot primary aluminum rose 350 yuan/mt from the previous trading day, with SMM A00 spot closing at 19,880 yuan/mt. The aluminum scrap market followed the rebound in primary aluminum, but downstream demand did not show a clear peak season trend, maintaining purchasing as needed. Yesterday, baled UBC aluminum scrap was quoted at 14,850-15,450 yuan/mt (excluding tax), and shredded aluminum tense scrap was quoted at 15,850-17,350 yuan/mt (excluding tax). By region, except for Hunan and Hubei, where aluminum tense scrap prices remained flat compared to the previous day, other regions such as Shanghai, Foshan, Jiangsu, Henan, and Anhui saw prices follow A00 in a pullback. In the short term, domestic aluminum scrap supply is unlikely to increase, and demand shows a weakening trend. Downstream producers remain cautious, maintaining purchasing as needed. The aluminum scrap market may remain in the doldrums, with the price difference between A00 aluminum and aluminum scrap narrowing slightly, but long-term structural support remains. Attention should be paid to marginal changes in supply and demand and macro policy direction.

Secondary aluminum alloy: Yesterday, aluminum prices ended a three-day decline, with SMM A00 aluminum prices rising 350 yuan/mt to 19,880 yuan/mt. Domestic SMM ADC12 prices were adjusted up 100 yuan/mt to the range of 20,600-20,800 yuan/mt. In the import market, overseas ADC12 was quoted at $2,460-2,490/mt, with import spot prices steady at 19,600-19,800 yuan/mt, and the immediate loss on imported ADC12 narrowed slightly. Yesterday, aluminum prices recovered some losses, but the secondary aluminum market followed weakly, with most quotes flat or slightly up 100 yuan/mt. Due to the recent large fluctuations in aluminum prices, downstream buyers remain cautious, with purchasing enthusiasm still low. It is expected that secondary aluminum alloy prices will continue to be in the doldrums in the short term.

Summary: On the macro front, the US said a tariff agreement is close to being reached, and international trade frictions are easing in the short term, with improved trade conditions potentially boosting global industrial metal demand expectations. In addition, China will actively promote the shift from foreign trade to domestic sales and maintain bonded policies, aiming to buffer the pressure of weak external demand, stabilize orders for aluminum processing enterprises, and broaden domestic demand channels, which is expected to alleviate domestic supply surplus pressure. Macro sentiment has eased, with risk sentiment released as the US temporarily suspends tariffs on countries that do not take retaliatory measures for 90 days, leading to a comprehensive rebound in non-ferrous metals. At the same time, continued aluminum destocking has also provided support for aluminum prices. Subsequent attention should focus on aluminum semis and terminal exports. Currently, China's direct aluminum semis exports to the US account for a limited share, and in the short term, some enterprises may take advantage of the temporary tariff suspension policy to conduct re-export trade operations. However, enterprises' supply chain restructuring and the establishment of tariff cost-sharing mechanisms will take a long time, which will still impact domestic exports. Fundamental destocking and policy expectations form the core support for aluminum prices, but the risk of escalating trade frictions on the macro front creates pressure. In the tug-of-war between longs and shorts, aluminum prices may hold up well, but attention should be paid to potential transitional issues that may cause periodic disturbances.

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