SMM Aluminum Market Morning Comment (Mar 6)

The most-traded SHFE 2404 aluminum contract opened at 19,080 yuan/mt overnight, with its low and high at 19,060 yuan/mt and 19,125 yuan/mt before closing at 19,065 yuan/mt, up 15 yuan/mt or 0.08%. LME aluminum opened at $2,237/mt yesterday, with its high and low at $2,241.5/mt and $2,223/mt respectively before closing at $2,226.5/mt, down $7.5/mt or 0.34%.

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. State Council released favourable policies to boost the economy and consumer demand during the “Two Sessions”. Fundamentally, 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 aluminium ingot and aluminium billets stocks will begin to drop.