SMM Aluminum Market Morning Comment (Jan 26)

Overnight, the most-traded SHFE 2403 aluminum contract opened at 18,925 yuan/mt, with its lowest and highest at 18,875 yuan/mt and 18,995 yuan/mt before closing at 18,990 yuan/mt, up 125 yuan/mt or 0.66%. LME aluminum opened at $2,222.5/mt yesterday, with its high and low at $2,244/mt and $2,205/mt respectively before closing at $2,232/mt, up $10/mt or 0.45%.

On the macro front, the US Markit PMI data for January exceeded expectations. The data demonstrated the resilience of the US economy, and expectations for interest rate cuts once again cooled significantly. In China, the macroeconomic environment was positive. The People’s Bank of China announced RRR cuts and will continue to keep a close eye on development of real estate, boosting domestic market sentiment. In terms of fundamentals, as CNY is drawing near, downstream consumption slowed down, but inventories remained at low levels driven by a high aluminum liquid ratio and downstream stockpiling before the CNY holiday. SMM predicts that the total domestic inventory accumulation during the 2024 CNY holidays may be lower than levels for the same period of previous years. In the short term, amid low inventory and no obvious imbalance between supply and demand, aluminum prices may fluctuate along with macro sentiment before CNY holidays.