SHFE Aluminum Jumps Initially and Then Pulls Back Today as Expectations for US Fed Interest Rate Cut Cool Down [[SMM] Aluminum Futures Brief Commentary]

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SMM, May 8:

Today, the most-traded SHFE aluminum 2506 contract opened at 19,560 yuan/mt, with a high of 19,615 yuan/mt, a low of 19,530 yuan/mt, and closed at 19,570 yuan/mt, up 0.46%. Trading volume was 48,000 lots, and open interest was 191,000 lots.

SMM Commentary: From a macro perspective, the US Fed maintained interest rates, and expectations for interest rate cuts cooled, coupled with expectations of a stronger US dollar, which suppressed the upside room for aluminum prices. If the EU-US trade negotiations break down, it may trigger tariff retaliation, exacerbating global trade uncertainties and indirectly pressuring the demand outlook for the aluminum market. On the fundamentals side, the cost side of the aluminum industry remained stable, while the demand side was at a critical period of transition between the off-season and peak season. However, except for the aluminum wire and cable sector, which saw an uptick in operating rates against the trend in the week before the holiday, the downstream sectors generally performed poorly. Entering May, there are expectations of a decline in subsequent orders for aluminum downstream industries. Driven by pre-holiday restocking demand, the destocking of domestic aluminum ingot inventory accelerated again at the end of April, approaching the 600,000 mt mark, providing a certain degree of upward support for aluminum prices before the holiday. This year, domestic aluminum product arrivals during the Labour Day holiday were lower than those of the same period last year, with overall inventory at a low level compared to the same period in the past three years. Inventory performance was slightly better than expected, and the overall inventory buildup was controllable, not causing significant pressure on aluminum prices after the holiday in the short term. However, there are still bearish expectations on the macro front overall. It is expected that domestic aluminum prices will mainly operate in the doldrums. Continuous attention should be paid to the progress of EU-US tariff negotiations and the implementation of domestic policies.

Today, the most-traded alumina 2509 contract opened at 2,800 yuan/mt, with a high of 2,857 yuan/mt, a low of 2,780 yuan/mt, and closed at 2,854 yuan/mt, up 99 yuan/mt or 3.58%, with open interest at 282,000 lots.

SMM Commentary: With the commissioning of new capacity and the resumption of production from maintenance, the operating capacity of alumina has rebounded significantly. In the last week before the holiday, the operating capacity increased by 3.48 million mt/year on a WoW basis. In the short term, some alumina refineries have plans for maintenance and production cuts, but at the same time, new alumina capacity will further ramp up production, and the operating capacity of alumina may show slight fluctuations. On the cost side, caustic soda prices have remained largely stable, while bauxite prices have decreased, leading to a decline in alumina costs and alleviating the loss pressure on alumina refineries. Overall, the tightening of alumina spot supply caused by the concentration of maintenance and production cuts in the early stage is expected to ease, and short-term prices are expected to fluctuate.

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