SMM Aluminium Market Morning Comment (Mar 4)

The most-traded SHFE 2404 aluminium contract opened at 18,985 yuan/mt last Friday night, with its low and high at 18,955 yuan/mt and 19,055 yuan/mt before closing at 19,025 yuan/mt, up 55 yuan/mt or 0.29%. LME aluminum opened at $2,224.5/mt last Friday, with its high and low at $2,248.5/mt and $2,208/mt respectively before closing at $2,236/mt, up $8/mt or 0.36%.

Summary: From a macro perspective, lower-than-expected economic data has strengthened the Fed’s interest rate cut expectations, making it possible to cut interest rates in June, and the US dollar index weakened; the domestic Two Sessions are about to begin, and the State Council released favourable policies to boost the economy and consumer demand, the market had strong expectations for stimulus policies. Fundamentally, the strike in Guinea has been suspended, and an aluminium smelter in Inner Mongolia has resumed power supply and production. In addition, there has been no increase in power in Yunnan and other regions. Aluminium smelters maintained stable production, and supply disturbances in China and overseas have basically eased. On the demand, the production resumption after CNY holiday boosted the operating rate of aluminium downstream enterprises. Short-term consumption is still expected to rebound, and spot transactions and outbound performance improved. Aluminium ingots inventory continued to grow in the second week after CNY holiday. SMM expects domestic aluminium ingot inventories may move between 800,000-900,000 mt in the first half of March , while aluminium billets inventories has entered destocking cycle last Thursday, about a week earlier than the same period last year. Overall, aluminium prices are likely to grow in traditional peak season in March, and we need to pay attention to aluminium supply, recovery of consumption, and when aluminium ingot and aluminium billets stocks will begin to drop.