Primary aluminium inventories jumped as demand remained subdued

[SMM Cast Aluminum Alloy Morning Comment: Supply and Demand Gradually Recover, ADC12 Prices Hold Up Well] After the holiday, market inquiry activities gradually recover, and trading activity increases, but actual transaction volumes remain relatively limited. Currently, downstream enterprises are mainly focused on restocking based on rigid demand and prioritizing the digestion of pre-holiday inventory. Entering March, with the full resumption of production at end-user companies, the certainty of MoM demand improvement strengthens, and consumption is expected to continue its rebound. Following the Lantern Festival, as enterprises fully resume production, market circulation is expected to gradually increase.

[SHFE Aluminum Morning Meeting Summary: SHFE aluminum consolidates narrowly in night session, downstream resumption slow, aluminum prices fluctuate] The Middle East turmoil triggered by the US-Iran conflict has become the largest geopolitical black swan for the global primary aluminum market, potentially causing supply disruptions at the million-mt level and pushing up smelting costs. Coupled with market risk aversion sentiment, aluminum price volatility may intensify. Going forward, it is necessary to remain vigilant against risks such as escalation of conflicts, strait blockades, raw material supply disruptions, and further macroeconomic disturbances impacting aluminum prices, and prudently address operational and investment risks brought about by supply chain fluctuations. Seasonal fundamental pressures remain prominent. On the supply side, new domestic and overseas aluminum projects are steadily ramping up production, with the liquid aluminum conversion ratio currently low. On the demand side, post-holiday processing material production is showing a steady recovery pace. However, under the current situation where seasonal supply exceeds demand and some goods are stockpiled at railway stations, it is expected that domestic aluminum ingot inventory will peak above 1.35 million mt after the holiday, setting a five-year high, which will be a key factor suppressing price rises. Overall, before and after the Chinese New Year, aluminum prices showed a trend of first declining then rising, and it is expected that SHFE aluminum will maintain a relatively strong consolidation pattern in the short term.

The Middle East turmoil triggered by the US-Iran conflict has become the major geopolitical black swan for the global primary aluminum market, potentially causing millions of tonnes of supply disruptions and raising smelting costs. Coupled with risk aversion, aluminum price volatility may intensify.