SMM Aluminum Market Morning Comment (Mar 5)

The most-traded SHFE 2404 aluminum contract opened at 18,990 yuan/mt overnight, with its low and high at 18,965 yuan/mt and 19,080 yuan/mt before closing at 19,055 yuan/mt, up 75 yuan/mt or 0.4%. LME aluminum opened at $2,235/mt yesterday, with its high and low at $2,242/mt and $2,216.5/mt respectively before closing at $2,238/mt, down $7/mt or 0.31%.

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. However, market opinions are divided over the time for interest rate cuts and its sustainability. 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 aluminum smelter in Inner Mongolia has resumed power supply and production. In addition, there has been no increase in power in Yunnan and other regions. Aluminum 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 aluminum downstream enterprises. Short-term consumption is still expected to rebound, and spot transactions and outbound performance improved. Aluminum ingots inventory growth slowed down in the third week after CNY holiday. SMM expects domestic aluminum ingot inventories may move between 800,000-900,000 mt in the first half of March, while aluminum billets inventories has entered destocking cycle for a week. Overall, aluminum prices are likely to grow in traditional peak season in March, and we need to pay attention to aluminum supply, recovery of consumption, and when aluminum ingot and aluminum billets stocks will begin to drop.